Why is Ingevity (NGVT) up 2.4% since its last earnings report?

A month has passed since Ingevity Corporation’s (NGVT) last earnings report. Shares have risen about 2.4% in that time, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ingevity Corporation headed for a recession? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the key drivers.

Ingevity’s second-quarter earnings and revenues exceeded estimates

Ingevity reported earnings (attributable to shareholders) of $46.7 million, or $1.10 per share, in the second quarter of 2018, up about 45% from $32.1 million, or 76 cents, a year ago.

Excluding one-time items, earnings for the quarter were $1.12 per share, which topped the Zacks Consensus Estimate of 99 cents.

The company’s revenues increased approximately 19% year-over-year to $308.6 million for the quarter, well ahead of the Zacks Consensus Estimate of $308.2 million.

Adjusted EBITDA increased approximately 33% year-over-year to $89.4 million in the quarter.

The company benefited from strong organic growth, acquisition participation in Georgia-Pacific pine chemicals, excellent commercial and operational execution and high productivity.

Segment overview

Performance Chemicals revenue increased approximately 24% year-over-year to $212.5 million in the quarter. Revenues were driven by sales growth in the oilfield industry due to increased drilling and production in the U.S., as well as strong adoption of the company’s paving technology. The buyout of Georgia-Pacific’s pine chemicals company also contributed to growth.

Revenue at the Performance Materials unit increased about 7% to $96.1 million. Growth was supported by high volumes of the company’s solutions tailored to comply with U.S. EPA Tier 3 and California LEV III greenhouse gas emissions regulations.

Balance

Ingevity ended the quarter with cash and cash equivalents of $83 million, more than doubling year-over-year. Long-term debt was $729.5 million, an increase of approximately 57%.

Perspectives

Ingevity is optimistic about 2018 as it witnesses the benefits of improving market conditions for core materials and high-value-added technologies. The company increased the midpoint and narrowed its 2018 guidance for adjusted EBITDA to $302 million to $314 million from $293 million to $307 million. The company maintained its sales forecast of $1.10 billion to $1.13 billion for the year.

How have estimates changed since then?

Last month, investors saw a downward trend in new estimates.

VGM results

At this point, Ingevity Corporation has a solid Growth Score of B, although it lags slightly behind its Momentum Score of C. However, the stock is rated F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Our style scores indicate that the stock is more suitable for growth investors than impulse investors.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. Notably, Ingevity Corporation carries a Zacks Rank #1 (Strong Buy). We expect an above-average rate of return on shares in the coming months.

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