AdvanSix Plunges 16.9% on Q4 Earnings Miss

AdvanSix (NYSE: ASIX) shares were down 16.9% on February 18, after the chemical company reported mixed Q4 results. ASIX produces nylon and other chemicals such as caprolactam and ammonium sulfate fertilizers .

Q4 Numbers

Adjusted earnings of $0.80 per share fell a cent short of analysts’ expectations of $2.26 per share, and were also lower than the adjusted earnings of $0.94 per share reported for the prior-year period.

However, sales jumped 24.6% year-over-year to $424.1 million and exceeded consensus estimates of $408.3 million. The increase in revenues reflected a 25% improved market-based pricing and a 12% higher raw material pass-through pricing, partially offset by lower volumes by 12%.

Investors were probably disappointed by the 270 bps year-over-year decline in earnings before interest, taxes, depreciation, and amortization (EBITDA) margin to 11.6%.

CEO Comments

Looking ahead, AdvanSix CEO, Erin Kane, commented, “We are targeting significant earnings growth as we continue to execute on our strategic priorities including superior operational excellence, differentiated product growth and being strong and disciplined stewards of capital.”

He further added, “Demand is expected to remain strong across our nylon and chemical intermediates product lines and we are in the midst of the strongest fertilizer environment that we’ve seen in over a decade. We are gaining momentum for our next chapter and remain confident that AdvanSix is well positioned to deliver robust performance and returns over the long-term.”

FY2022 Outlook

Based on expected strong execution and robust ammonium sulfate fertilizer performance, the company expects significant earnings growth in FY2022.

The company continues to expect Capital Expenditures related to planned plant turnarounds and timing of project execution to be in the range of $95 million to $105 million in 2022.

Wall Street’s Take

Following the Q4 results, Stifel analyst Vincent Anderson maintained a Buy rating on AdvanSix with a price target of $58 (69.59% upside potential).

Anderson remains a buyer of the stock, especially at the current stock price dip based on the accretion coming up from the “strategically and financially sound” acquisition of U.S. Amines, which requires minimal leverage.

The rest of the Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 2 unanimous Buys. The average AdvanSix stock forecast of $59 implies 72.51% upside potential from current levels.

TipRanks’ Smart Score

ASIX scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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