Avient (AVNT) stock rose 3.4% in after-hours trading on Thursday as the company reported preliminary 3Q numbers and provided an update related to the cost synergies associated with the Clariant Masterbatch acquisition.
Avient (formerly PolyOne), a provider of specialized and sustainable material solutions, expects to deliver adjusted EPS of $0.43 in 3Q due to a recovery in demand. Analysts were expecting EPS of $0.36. The company’s composites business is benefiting from higher demand for outdoor high-performance applications. So, Avient expects the Specialty Engineered Materials segment to deliver 15% Y/Y EBITDA growth.
The company said that a number of end markets that were adversely impacted by COVID-19 in 2Q are recovering and it now expects 3Q sales and adjusted EBITDA of about $905 million and $107 million, respectively. Also, it anticipates free cash flow of $80 million in 3Q and is on-track to deliver free cash flow of $240 million this year, reflecting a growth of 50% compared to 2019.
With regard to the Clariant Masterbatch acquisition, Avient stated that the acquisition was immediately accretive to adjusted EPS. The company, which was formerly called PolyOne, completed the purchase of the color masterbatch businesses of Clariant and Clariant Chemicals India Ltd. on July 1 and changed its name to Avient.
Excluding the impact of step-up depreciation and amortization related to the acquisition, Avient expects 3Q adjusted EPS to increase 16% to $0.51. Moreover, the company predicts cost synergies of $75 million by the end of the third year compared to the original forecast of $60 million.
Following the better-than-anticipated 3Q numbers and other updates, Oppenheimer analyst Colin Rusch stated, “We are also encouraged by management's updated outlook for acquisition cost synergies, reflecting a 25% increase vs. its initial expectations.”
“We continue to view AVNT as a key partner in helping its customers meet sustainability and performance goals and remain constructive on shares with this positive print.” Rusch reiterated a Buy rating with a price target of $37. (See AVNT stock analysis on TipRanks)
The average analyst price target of $32.67 indicates a 30% upside potential in Avient stock in the coming months. The stock is down 32% year-to-date. Currently, the Street has a Moderate Buy consensus for Avient with 4 Buys, 3 Holds and no sell ratings.