Ashland (ASH) Benefits From Strong End-Mmarket Demand & Pricing
Ashland Global Holdings Inc. ASH is benefiting from strong demand across its end markets and disciplined pricing actions amid headwinds from input cost inflation.
Shares of Ashland, a Zacks Rank #3 (Hold) stock, have gained 8.8% over the past year against the 24% decline of its industry.
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Ashland’s restructuring actions have provided it with a profitable, high-margin portfolio focused on high-quality markets and better positioned it for future growth. It is benefiting from solid demand in most consumer end markets. Its industrial businesses are witnessing strong demand recovery. Ashland is seeing higher demand across core personal-care end markets. The company is also gaining from the contributions from the Schulke & Mayr acquisition.
The company is also taking a number of actions including reduction of operating costs to boost profitability. Cost-reduction measures are expected to support its margins in fiscal 2023. The company’s pricing measures are also contributing to its top line growth. Its pricing and mix improvement actions are expected to cover the current inflation.
Ashland also remains committed to boosting its cash flows and returning value to shareholders. The company remains focused on expanding margins and improving free cash flow conversion. It generated cash flows from operating activities of $179 million in the last reported quarter, up around 19% year over year. The company, in May 2022, raised its quarterly cash dividend by 12% to 33.5 cents per share. Its board also authorized a new, evergreen $500-million common stock repurchase program.
However, tight raw material supply conditions are a concern. The company faces challenges from availability of raw materials. It is seeing a significant inflation in raw material and energy costs. Raw material and supply chain tightness are expected to continue in the short haul.
The company also faces headwinds from global logistics and shipping constraints. Ashland witnessed higher freight and logistics costs in fiscal 2022. The supply chain and logistics challenges are expected to persist over the near term. This might result in higher costs and weigh on the company’s margins. Pandemic-related lockdowns in China and the impact of the Russia-Ukraine conflict are other concerns.
Ashland Inc. Price and Consensus
Ashland Inc. price-consensus-chart | Ashland Inc. Quote
Stocks to Consider
Better-ranked stocks worth considering in the basic materials space include Steel Dynamics, Inc. STLD, Olympic Steel, Inc. ZEUS and Commercial Metals Company CMC.
Steel Dynamics has a projected earnings growth rate of 36.1% for the current year. The Zacks Consensus Estimate for STLD’s current-year earnings has been revised 7.3% upward in the past 60 days.
Steel Dynamics has a trailing four-quarter earnings surprise of roughly 6.2%. STLD has rallied roughly 78% in a year. The company currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Olympic Steel currently carries a Zacks Rank #1. The consensus estimate for ZEUS's current-year earnings has been revised 4.8% upward in the past 60 days.
Olympic Steel’s earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 25.4%, on average. ZEUS has rallied around 75% in a year.
Commercial Metals currently carries a Zacks Rank #1. The Zacks Consensus Estimate for CMC's current-year earnings has been revised 13.8% upward in the past 60 days.
Commercial Metals’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 19.7%, on average. CMC has gained around 55% in a year.
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Steel Dynamics, Inc. (STLD) : Free Stock Analysis Report
Ashland Inc. (ASH) : Free Stock Analysis Report
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Olympic Steel, Inc. (ZEUS) : Free Stock Analysis Report
