Ingevity Gains on Capa Buyout Amid Weak Industrial Demand

We issued an updated research report on Ingevity Corporation NGVT on May 28.

The company is benefiting from the acquisition of the Capa caprolactone business. The buyout enabled Ingevity with a new technology platform to drive revenue and earnings growth. The addition of the engineered polymers product line through the acquisition is driving the company’s Performance Chemicals division. The acquired business is expected to deliver strong growth in 2020.

Ingevity is also seeing strong momentum in its Performance Materials division as reflected by an 11% increase in sales in the last reported quarter. It is benefiting from strong demand for base automotive activated carbon products and honeycomb scrubber products, as a result of automotive customers’ complete implementation of the U.S. and Canada emission standards.

Ingevity is also gaining from higher sales in China as automakers in the country have completed the implementation of the China 6 standard.

Moreover, Ingevity is seeing robust growth in pavement technologies on strength in North America. The company is also seeing improvement in certain countries in South America. It is witnessing the strong adoption of Evotherm warm-mix technology.

However, Ingevity is seeing weakness in industrial applications. In the last reported quarter, its Performance Chemicals unit was affected by a slowdown in industrial activities. The company witnessed a roughly 17% decline in sales related to industrial specialties applications in the quarter, hurt by weakness in industrial demand and the exit of an unprofitable distribution deal. Pressure in industrial specialties is likely to continue moving ahead.

The company also sees sustained weakness in the rosin market in 2020. Further, Ingevity expects the oilfield industry to be volatile throughout 2020, with a significant impact on drilling in North America.

Moreover, the company anticipates a year-over-year revenue decline of 25-30% for the second quarter. Also, it expects a year-over-year decline in adjusted EBITDA of 35-40% for the second quarter. The outlook is partly driven by the closure of auto production in North America and Europe.

Ingevity Corporation Price and Consensus

 

Ingevity Corporation Price and Consensus

Ingevity Corporation price-consensus-chart | Ingevity Corporation Quote

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the basic materials space are Agnico Eagle Mines Limited AEM, Equinox Gold Corp. EQX and Newmont Corporation NEM.

Agnico Eagle currently sports a Zacks Rank #1 (Strong Buy) and has a projected earnings growth rate of 75.3% for 2020. The company’s shares have gained 54.1% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Equinox Gold has a projected earnings growth rate of 65.5% for 2020. It currently flaunts a Zacks Rank #1. The company’s shares have rallied 52.6% in a year.

Newmont has a projected earnings growth rate of 82.6% for the current year. The company’s shares have rallied around 86% in a year. It currently has a Zacks Rank #2 (Buy).

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