Ingevity (NGVT) Down 12.4% Since Last Earnings Report: Can It Rebound?

A month has passed since Ingevity’s (NGVT) last earnings report. Shares have lost about 12.4% in that time, underperforming the S&P 500.

Will the recent negative trend continue until the next earnings release, or is Ingevity due for a breakout? 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 better understand the important catalysts.

Ingevity’s earnings and revenues topped estimates in the first quarter

In the first quarter of 2024, Ingevity reported a loss of $1.54 per share. In the same quarter last year, the company recorded a profit of $1.35.

Adjusted earnings for the reported quarter were 52 cents per share, compared with $1.09 in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of 37 cents.

The company’s revenues declined approximately 13.4% year-over-year to $340.1 million for the quarter, but beat the Zacks Consensus Estimate of $319.9 million. The decline was primarily due to the repositioning of the Performance Chemicals unit, which included exiting certain end markets within the Industrial Specialties product line.

The most important information in the segment

The Performance Chemicals division generated revenue of $147 million in the reported quarter, down approximately 21% year-over-year. The Zacks Consensus Estimate for this stock is $121.9 million. Road Technologies’ product line sales of $45.7 million were unchanged from the year-ago period, missing the Zacks Consensus Estimate of $49.5 million. Industrial Specialties product line sales of $101.3 million declined 28% on segment repositioning and reduced industrial demand, beating the Zacks Consensus Estimate of $83.9 million.

Revenue at the Performance Materials unit increased 3% year-over-year to $145.1 million. It failed to reach the consensus estimate of $149.5 million. The increase was driven by higher prices and higher volumes in automotive end markets in all regions. Segment EBITDA amounted to USD 78.0 million, an increase of 12% compared to the previous year’s quarter, mainly due to lower production costs, in particular energy and increased operational efficiency, which translated into a segment EBITDA margin of 53.8 %.

The Advanced Polymer Technologies unit reported sales of $48 million, down 27% year-over-year, narrowly missing the Zacks Consensus Estimate of $48.3 million. Weakening demand is observed on the end markets of the segment, which translated into a deterioration of the situation. Segment EBITDA was $9.5 million, down 31% due to volume and price reductions, slightly offset by lower production costs. The segment’s EBITDA margin was 19.8%.

The story continues

Financial

First quarter operating cash flow was negative $12.1 million, with negative free cash flow of $28.7 million, reflecting regular seasonal inventory growth in the first quarter and a cash inflow of $19.8 million resulting from losses from the resale of CTO.

There were no share repurchases during the quarter, leaving $353.4 million under management’s current $500 million authorization. Net leverage was 3.6 times, which means lower adjusted EBITDA than last year.

Perspectives

The company forecasts 2024 sales in the range of $1.4-1.55 billion and adjusted EBITDA in the range of $365-390 million.

How have estimates changed since then?

It turns out, revision estimates have flattened over the past month.

VGM results

At this point, Ingevity has a weak Growth Score of D, but its Momentum Score is doing slightly better at C. Plotting a somewhat similar path, the stock was given a grade of B on the value side, putting it in the top 40% 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.

Perspectives

Ingevity carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Ingevity is part of the Zacks Chemicals – Specialty industry. Another stock in the same industry, Ecolab (ECL), has gained 0.9% over the past month. More than a month has passed since the company announced its results for the quarter ended March 2024.

Ecolab reported revenue of $3.75 billion in its most recently reported quarter, representing a year-over-year change of +5.1%. EPS of $1.34 for the same period compared to $0.88 a year ago.

For the current quarter, Ecolab is expected to report earnings per share of $1.66, representing a change of +33.9% from the prior-year quarter. The Zacks Consensus Estimate has changed +0.2% over the past 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Ecolab. The stock also has a VGM Rating of C.

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