What’s Not To Like About Avient’s Accelerating Revenue Growth
Avient (NYSE:AVNT) has had a transformational year. Not only did it complete the Clarient Masterbach acquisition and take on the new name Avient but a shift in business trends has it poised for accelerating growth in 2021. The pandemic, as we all know, has wiped the store shelves clean of many products and resulted in a massive backlog for manufacturers. Manufacturers across all verticals are scrambling to catch up with demand and still have low inventory to contend with as well. What this means for Avient is that, as a source-market of resin and composite materials for virtually every manufacturing industry, its business is about to boom.
Avient Revenue Accelerates With Strength In All Segments
Avient had a quarter so profoundly good it boggles the mind. The company reported $997 million in revenue to set a company Q4 record and beat the consensus by 1100 basis points. The revenue is up 7.8% from the previous quarter and 51% from last year with a positive outlook for the coming year. Not only is the revenue growth on a YOY basis but the growth is accelerating from last quarter’s 31% YOY increase and will continue that pace or greater over the next two quarters at least.
The company reports organic growth is strong in all categories including healthcare, packaging, and consumer end-markets which we find to be no surprise. All you need to know that there is a high demand for consumer goods, packaging and packaging materials is to take a look at the eCommerce figures. On a segment basis, Inks and Additives saw its revenue grow by 45% in the 4th quarter, led by a 58% increase in SEM revenue. Within the SEM segment, management points out strong demand for high-performance outdoor materials such as what might be used by an RV company or perhaps an outdoor equipment company.
Moving down the report, the company reports that margins are up and well ahead of their expectations. The merger with Clarient Masterbach is moving along quite rapidly and resulted in over $70 million in cost savings and synergies. On the bottom line, both the GAAP and adjusted EPS grew on a YOY basis and beat the consensus. The GAAP EPS of $0.81 beat by $0.48 due to one-time benefits during the quarter, the adjusted EPS of $0.52 is up from last year’s $0.34 and beat by a nickel.
In terms of guidance, the company is forecasting about 8% in revenue growth this year with EPS in the range of $1.93 to $2.40. That’s EPS growth in the range of 24% but compares with a consensus of $2.25 so is not altogether exciting but there is a mitigating factor. The consensus estimate for 2021 EPS is up 50% in the last 6 months and a high bar to beat.
Avient Is On Track For An 11th Dividend Increase
Avient is carrying some debt after its merger but not enough to be worried about, particularly with such a healthy outlook for 2021. That aside, the balance sheet is in good shape with ample cash and growing FCF that can easily support another 5% to 10% increase with little trouble. The company just declared the second of what will likely be four $0.2125 payouts for a yield of 2.0% annually. The stock goes ex-dividend on Mar. 15. The next increase is expected later in the year.
The Technical Outlook: Avient Is Poised To Move Higher
Shares of Avient are poised to move higher, the only question is if they will. With price action edging higher after the Q4 report and confirming support at the short-term moving average we think the move higher will be sooner rather than later. Both the stochastic and MACD support this move so it could be a strong one. The first target for resistance is at the recent high near $46, if that can be broken a move up to the $55 to $60 level is expected next.
