Ashland Global Holdings Inc. ASH has been performing well of late. The company has seen its shares pop roughly 11% over the past three months. Forecast-topping second-quarter fiscal 2018 results, upbeat outlook, dividend hike and strategic initiatives have contributed to the gain in Ashland’s shares.
If you haven’t taken advantage of the share price appreciation yet, the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
Let’s delve deeper into the factors that make this chemical company an attractive investment option.
What’s Working in Favor of ASH?
An Outperformer: Ashland has outperformed the industry over a year. The company’s shares have rallied around 18.2% over this period, compared with roughly 1.4% decline recorded by the industry.
Estimates Northbound: Annual estimates for Ashland have moved north over the past three months, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for fiscal 2018 has increased by around 3.2% to $3.51 per share. The Zacks Consensus Estimate for fiscal 2019 has also moved up 3.1% over the same timeframe to $3.97.
Positive Earnings Surprise History: Ashland has an impressive earnings surprise history. It has outpaced the Zacks Consensus Estimate in three of the trailing four quarters, delivering a positive average earnings surprise of 13.9%.
Strong Growth Prospects: The Zacks Consensus Estimate for earnings for fiscal 2018 for Ashland is currently pegged at $3.51, reflecting an expected year-over-year growth of 43.9%. Moreover, earnings are expected to register a 13.1% growth in fiscal 2019. The company also has an expected long-term earnings per share growth of 10%.
Upbeat Outlook: Ashland’s earnings for the fiscal second quarter outstripped expectations on the back of strong gains in sales and margins across its operating segments. The company raised its adjusted earnings guidance for fiscal 2018 based on strengthening outlook for each of its operating segments that are on track to meet or surpass their respective original financial targets for the fiscal.
Ashland now expects adjusted earnings for the full year to be $3.30-$3.50 per share, up from $2.90-$3.10 it expected earlier. The revised guidance reflects a 35-45% year over year growth. The growth is expected to be supported by the company’s actions to sustain and grow its premium mix, its focus on improving asset utilization and cost management. The company has announced a program to eliminate $120 million of existing corporate and Specialty Ingredients unit’s selling, general and administrative (SG&A) costs as well as manufacturing facility-related expenses.
The company also expects to generate free cash flows of more than $220 million in fiscal 2018. It also projects adjusted earnings in the range of 95 cents to $1.05 per share for third-quarter fiscal 2018, versus 83 cents in the prior-year quarter.
Moreover, Ashland’s board raised its quarterly cash dividend by 11% to 25 cents per share.
Ashland is also exploring strategic alternatives for its Composites segment, as well as for the butanediol (BDO) manufacturing facility in Marl, Germany, and associated merchant Intermediates and Solvents products. The move is likely to benefit the company by focusing on its portfolio of Specialty Ingredients.
Moreover, Ashland should also gain from the appropriate pricing actions in response to raw material cost inflation. The company increased prices of selective products, including BDO and derivatives prices. The move is driven by sustained rise in the costs of major raw materials.
Ashland Global Holdings Inc. Price and Consensus
Ashland Global Holdings Inc. Price and Consensus | Ashland Global Holdings Inc. Quote
Other Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Westlake Chemical Corporation WLK, The Chemours Company CC and Versum Materials, Inc. VSM, each carrying a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied roughly 60% over a year.
Chemours has an expected long-term earnings growth rate of 15.5%. The company’s shares have gained around 14% in a year.
Versum has an expected long-term earnings growth rate of 13%. Its shares have gained roughly 12% over a year.
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