Element Solutions (ESI) Up 4.1% Since Last Earnings Report: Can This Continue?

It’s been a month since Element Solutions’ (ESI) last earnings report. Shares rose about 4.1% in that time, underperforming the S&P 500.

Will the recent positive trend continue until the next earnings release, or will Element Solutions slow down? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

Element’s first-quarter profit beats estimates, revenue lags

Element Solutions reported earnings per share of 23 cents in the first quarter of 2024, compared to 18 cents in the year-ago quarter.

Excluding one-time items, profit was 34 cents per share. It beat the Zacks Consensus Estimate of 32 cents.

The company generated net sales of $575 million compared to the previous year. This figure missed the Zacks Consensus Estimate of $601.8 million. Organic net sales increased by 1%.

In the reported quarter, the company recorded a recovery in the electronics markets. Investments in high-value technologies have had a positive effect, while shifting pricing activities in the face of falling raw material prices has led to higher margins in the industrial sector.

During the quarter, ESI also saw adjusted EBITDA grow 13% year-over-year.

The most important information in the segment

Net sales in the electronics segment increased 3% year-over-year to $349 million in the reported quarter. Organic net sales increased 4% compared to the previous year. This amount was lower than our estimate of USD 368.1 million.

In the Industrial and Specialty segment, net sales declined 4% year-over-year to $226 million, with organic net sales declining 3%. This amount was lower than our estimate of $250.5 million.

Financial position

Element Solutions ended the quarter with cash and cash equivalents of $286.3 million, down approximately 1% from the prior quarter. At the end of the quarter, long-term debt amounted to USD 1,918.9 million and remained unchanged.

Cash from operations was $58 million and free cash flow was $39 million in the reported quarter.

The story continues

Perspectives

The company currently expects adjusted EBITDA in the range of $515 million to $530 million for 2024. In the second quarter of 2024, adjusted EBITDA will be approximately $125 million.

The company expects to generate free cash flow of $280 million to $300 million in 2024.

How have estimates changed since then?

Investors have witnessed a downward trend in estimate revisions over the past month.

VGM results

Currently, Element Solutions has a solid Growth Score of B, although well behind its Momentum Score of F. However, the stock is rated a C on the value side, ranking in the middle 20% for this investment strategy.

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

Perspectives

Estimates for this company generally show a downward trend, and the scale of this revision indicates a downward shift. Notably, Element Solutions carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Element Solutions belongs to the Zacks Chemical – Specialty industry. Another stock in the same industry, PPG Industries (PPG), has gained 0.5% over the past month. More than a month has passed since the company announced its results for the quarter ended March 2024.

In the most recent quarter, PPG Industries reported revenue of $4.31 billion, representing a year-over-year change of -1.6%. EPS of $1.86 in the same period compared to $1.82 a year ago.

PPG Industries is expected to report earnings per share of $2.49 for the current quarter, representing a year-over-year change of +10.7%. Over the past 30 days, the Zacks Consensus Estimate has moved -0.1%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for PPG Industries. The stock also has a VGM Rating of C.

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