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Why Is Element Solutions (ESI) Up 2.1% Since Last Earnings Report?

It has been about a month since the last earnings report for Element Solutions (ESI). Shares have added about 2.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Element Solutions due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Element Solutions’ Q1 Earnings Beat Estimates, Sales Lag

Element Solutions recorded first-quarter 2023 earnings (as reported) of 18 cents per share compared with 23 cents in the year-ago quarter.

Adjusted earnings per share came in at 30 cents in the quarter, which beat the Zacks Consensus Estimate of 29 cents.

The company generated net sales of $574.4 million, down 15.5% year over year. The figure missed the Zacks Consensus Estimate of $628 million. The company faced headwinds from the weakening of demand in smartphones and the broader electronic supply chain.

Segment Highlights

Net sales in the Electronics segment fell 23% year over year to $339.6 million in the reported quarter. Organic net sales were down 11% from the year-ago quarter’s reported figure.

Net sales in the Industrial & Specialty were down 2% year over year to $234.8 million. Organic net sales moved up 2%.

Financial Position

Element Solutions ended the quarter with cash and cash equivalents of $279 million, up 27.5% year over year. Long-term debt was $1,882.1 million at the end of the quarter, down 0.5%.

Cash from operating activities was $53.5 million in the quarter. Free cash flow was $44.9 million.

Outlook

The company expects adjusted EBITDA for second-quarter 2023 of roughly $120 million. ESI now expects adjusted EBITDA to be at the bottom end of its prior guidance of $510 million to $530 million for 2023.

It estimates full-year 2023 adjusted earnings per share of around $1.40. ESI anticipates generating free cash flow of roughly $275 million for 2023.

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How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -6.44% due to these changes.

VGM Scores

Currently, Element Solutions has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 this revision indicates a downward shift. Notably, Element Solutions has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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