Why Is Ingevity Corporation (NGVT) Down 23.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Ingevity Corporation (NGVT). Shares have lost about 23.9% 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 Corporation 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 catalysts.

Ingevity's Q4 Earnings Surpass Estimates, Sales Miss

Ingevity reported profits (attributable to stockholders) of $44.3 million or $1.05 per share in fourth-quarter 2019, up 5.2% from $42.1 million or 99 cents per share a year ago.

Adjusted earnings per share for the reported quarter were $1.10, surpassing the Zacks Consensus Estimate of 98 cents per share.

The company’s revenues rose 8.9% year over year to $303.4 million in the quarter. However, the top line lagged the Zacks Consensus Estimate of $304.1 million.

Adjusted EBITDA climbed 24.3% year over year to $91.1 million in the quarter. The chemical maker faced challenges from continued macroeconomic pressure, especially in industrial applications. However, it gained from growth in end-use applications, which were driven by regulation, adoption of technology and spending on infrastructure.

Segment Review

Revenues from the Performance Chemicals division rose 5.5% year over year to $175.2 million in the quarter under review. The top line was driven by the addition of the engineered polymers product line and strong pavement technology performance.

Revenues from the Performance Materials unit climbed 14% to $128.2 million, powered by automakers’ continued implementation of China 6 gasoline vapor emission control regulations. The top line was also supported by strong gains in sales of the company’s solutions geared to meet the U.S. and Canadian automotive emission standards.

2019 Highlights

For 2019, profit (attributable to stockholders) was $183.7 million or $4.35 per share, up 8.6% from $169.1 million or $3.97 per share recorded in 2018. Revenues went up 14.1% year over year to $1.293 billion.

Balance Sheet

Ingevity ended 2019 with cash and cash equivalents of $56.5 million, down 27.1% year over year. Long-term debt was $1,228.4 million, up 65.7%.

Outlook

Ingevity expects sales for 2020 to be between $1.3 billion and $1.35 billion. It also anticipates adjusted EBITDA for the year to be in the band of $400-$420 million.

Free cash flow for 2020 has been forecast to be in the band of $200-$220 million.

Per the company, the outlook represents little to no improvement in the global macroeconomic climate but anticipates minimal impact (which is yet to be known) from the coronavirus outbreak in China.

The company expects revenues to be flat to down modestly for its Performance Chemicals segment. Engineered polymers and pavement technologies are expected to witness solid growth, which is likely to be offset by ongoing pressure in industrial specialties and oilfield applications.

Ingevity also expects to generate double-digit revenue growth and accretion in adjusted EBITDA margins for its Performance Materials unit.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -29.75% due to these changes.

VGM Scores

At this time, Ingevity Corporation has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 Corporation has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.