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Versum Materials (VSM) Q1 Earnings Meet, Sales Miss Estimates

Anindya Barman

Versum Materials, Inc. VSM recorded profit of $61.1 million or 56 cents per share in first-quarter fiscal 2019 (ended Dec 31, 2018), up more than three times from $18.7 million or 17 cents a year ago. The improvement reflects the impacts of the U.S. Tax Act.

Barring one-time items, adjusted earnings came in at 55 cents per share, which matched the Zacks Consensus Estimate.

Sales rose around 3% year over year to $339.5 million for the quarter, driven by gains in both Materials and Delivery Systems & Services (DS&S) segments. The figure, however, trailed the Zacks Consensus Estimate of $343.7 million.

Versum Materials Inc. Price, Consensus and EPS Surprise

 

Versum Materials Inc. Price, Consensus and EPS Surprise | Versum Materials Inc. Quote

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Segment Highlights

Revenues at the Materials segment rose 3% year over year to $221.7 million in the reported quarter, driven by double-digit volume gains in Advanced Materials as well as higher volumes in Process Materials. Strong sales in both memory and logic segments offset softer foundry activity.
 
Sales at the DS&S unit went up 2% year over year to $117.2 million in the quarter on the back of continued strong equipment and installation project activities.

Financials

Versum Materials ended the quarter with cash and cash equivalents of $408 million, up around 47% year over year. Long-term debt was $973.2 million, down 0.4% year over year.

Cash from operations was $46 million for the reported quarter, up from $39 million a year-ago.

Outlook

For fiscal 2019, the company now sees sales in the range of $1,380-$1,430 million (up 1-4% year over year), down from its earlier view of $1,425-$1,475 million. Adjusted EBITDA has been forecast between $465 million and $485 million (up 4-9% year over year), also down from prior view of $475-$495 million.

The company expects slowing memory output and weakening industry capital spending environment to impact its top-line performance. However, it expects new Process of Record (“POR”) wins and infrastructure projects in DS&S to mitigate some of this impact. The company also expects positive segment mix and cost discipline to drive EBITDA margins.

Price Performance

Shares of Versum Materials have gained 6.3% over a year against the industry’s 2.1% rise.



Zacks Rank & Stocks to Consider

Versum Materials currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks worth considering in the basic materials space include Seabridge Gold Inc. SA, Israel Chemicals Ltd. ICL and Franco-Nevada Corporation FNV.

Seabridge Gold has an expected earnings growth rate of 20.8% for the current year and carries a Zacks Rank #1 (Strong Buy). Its shares have rallied 26% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Israel Chemicals has an expected earnings growth rate of 11.1% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have shot up 41% over the past year.  

Franco-Nevada has an expected earnings growth rate of 8.7% for the current year and carries a Zacks Rank #2. Its shares have gained 8% in the past year.

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