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Why Is Ingevity (NGVT) Down 26.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Ingevity (NGVT). Shares have lost about 26.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its 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 get a better handle on the important drivers.

Ingevity's Earnings and Revenues Lag Estimates in Q1

Ingevity recorded first-quarter 2023 earnings of $1.35 per share compared with $1.55 in the prior-year quarter.

Adjusted earnings in the reported quarter were $1.09 per share, down from $1.62 in the year-ago quarter. The figure missed the Zacks Consensus Estimate of $1.26.

The company’s revenues rose around 3% year over year to $392.6 million in the quarter, which lagged the Zacks Consensus Estimate of $410.2 million. The top line was driven by price increases across Ingevity’s segments and contributions from the Ozark road markings business acquisition. These were partly offset by lower volumes in most business lines. The company witnessed continued destocking in certain product lines, particularly adhesives in its Industrial Specialties business.

Segment Highlights

The Performance Chemicals division generated revenues of $185.6 million in the reported quarter, up around 8% year over year. Sales fell roughly 3% in Industrial Specialties while sales in Pavement Technologies went up approximately 64%.

Revenues in the Performance Materials unit fell 5% year over year to $141.4 million, primarily due to a slower recovery in automotive in China and currency headwinds, which offset higher prices and strong sales in North America.

The Advanced Polymer Technologies unit logged sales of $65.6 million, up 6% year over year. Higher prices across the segment and improved demand in automotive and bioplastics more than offset the softer demand in Europe and customer destocking in Asia.

Financials

Ingevity ended the quarter with cash and cash equivalents of $77.9 million, down around 65% year over year. Long-term debt was $1,502.5 million, up around 59% year over year.

Operating cash flow was $5.2 million in the quarter. Free cash flow was a negative $20.2 million.

The company repurchased shares worth $33.4 million in the reported quarter.

Outlook

The company sees its sales for 2023 to the band of $1.75-$1.95 billion and adjusted EBITDA in the range of $450-$480 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -24.87% due to these changes.

VGM Scores

At this time, Ingevity has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Ingevity has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Ingevity belongs to the Zacks Chemical - Specialty industry. Another stock from the same industry, Element Solutions (ESI), has gained 2.9% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.

Element Solutions reported revenues of $574.4 million in the last reported quarter, representing a year-over-year change of -15.6%. EPS of $0.30 for the same period compares with $0.38 a year ago.

For the current quarter, Element Solutions is expected to post earnings of $0.32 per share, indicating a change of -15.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -4.6% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Element Solutions. Also, the stock has a VGM Score of B.

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