Element Solutions (ESI) Stock Up 52% in 3 Months: Here's Why
Zacks Investment Research | Dec 16, 2020 08:40PM ET
Element Solutions (NYSE:ESI) Inc.'s industry ’s rise of 17.8% over the same time frame.
Element Solutions, a Zacks Rank #2 (Buy) stock, has a market cap of roughly $4.2 billion and average volume of shares traded in the last three months is around 1,847.7K. The company has an expected long-term earnings per share growth rate of 10.4%.
Let’s delve deeper into the factors behind the stock’s price appreciation.
h3 What’s Favoring ESI?/h3Element Solutions is benefiting from healthy demand in its high-end electronics business and the rebound in the automotive industry. It is witnessing a recovery in its end markets from the coronavirus-induced slowdown.
Element Solutions saw a strong recovery in its automotive and industrially oriented businesses in the third quarter from the second-quarter lows. Its high-end electronics business also continued its momentum in the third quarter, driven by consistent strong demand. Element Solutions believes that it has ample growth opportunities based on the megatrends driving its markets and its ability to outperform its markets through sound strategic execution.
The company recently announced an increase in its financial guidance. It raised its fourth-quarter adjusted EBITDA guidance to roughly $118 million from its prior view of $90-$95 million. The company expects this to translate to adjusted EBITDA of roughly $415 million for 2020. Element Solutions also sees mid-to-high single digit growth in full-year adjusted earnings per share.
Earnings estimates for Element Solutions have also been going up over the past two months. The Zacks Consensus Estimate for the current year has increased 14.3%. The consensus estimate for 2021 has also been revised 15.5% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.
Meanwhile, the company is implementing a number of cost-containment measures including reduction of traveling costs. These actions are likely to support its margins in 2020.
Element Solutions should also benefit from the acquisitions of Kester and DMP Corporation. The Kester acquisition has added capabilities and scale to its existing electronics assembly materials business. Moreover, the DMP buyout has expanded Element Solutions’ investment in technology to offer innovative solutions. The company expects these two acquisitions to benefit its net sales by roughly $15 million in the fourth quarter.
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