Market Overview

Why You Should Consider Adding Ingevity To Your Portfolio

Ingevity Delivers On Expectations And Executes Solidly, Buckingham Says In Upgrade
Here's Why Loop Capital 'Begrudgingly' Downgraded Ingevity

We believe that Ingevity Corporation NGVT is a solid choice for investors seeking exposure in the chemical space. The company's strengthening businesses in the Performance Materials and Performance Chemicals segments as well as its strategic acquisitions bode well.

The stock has been upgraded to a Zacks Rank #1 (Strong Buy) on Nov 9.

Why the Upgrade?

Ingevity's financial outperformance in the past few quarters has created positive sentiments for the stock. In the past year, the company's shares have rallied 49.8%, substantially outperforming 14.4% gain of the industry. Notably, the company pulled off an average positive earnings surprise of 10.38% in the last four quarters.

In third-quarter 2017, Ingevity's earnings topped the Zacks Consensus Estimate by 14.67%, while increasing 34.4% year over year. Revenues too surpassed estimates by 1.99%. The quarter's profitability increased on the back of growth in volumes, favorable pricing, lower raw material costs, improved productivity and favorable forex gains.

For 2017, Ingevity anticipates gaining from the growing customer preference for its products and services in both the business segments. Revenues are now anticipated to be in the $945-$955 million range versus the earlier forecast of $940-$955 million. The revised mid-point is now $950 million, up from $947.5 million expected earlier. Adjusted earnings before interest, tax, depreciation and amortization are now expected to be $227-$232 million versus $220-$230 expected earlier. Net debt ratio has been revised down to 1.3 from 1.5 expected previously.

We believe that strong demand for Ingevity's carbon technologies in the automotive and process purification industries have boosted growth prospects of its Performance Materials segment. To tap the growing demand for pelletized carbon products, the company is constructing a new activated carbon extrusion plant in China. The investment on the new plant is part of the capital expenditure planned for expanding the Performance Materials segment. Also, rising demand for pavement and oilfield technologies and that for industrial specialties have strengthened the company's Performance Chemicals segment's business. The buyout of Georgia-Pacific's pine chemicals business will yield synergies in the form of lower transportation and logistics costs and increase in manufacturing efficiency in three chemical plants.

The stocks' earnings estimates for 2017 have been revised upward by five analysts while that for 2018 have been raised by two in the last 30 days. Currently, the Zacks Consensus Estimate stands at $2.49 for 2017 and $2.85 for 2018, representing 2.9% and 1.4% increase over their respective estimates 30 days ago.

Ingevity Corporation Price and Consensus

Ingevity Corporation Price and Consensus | Ingevity Corporation Quote

Other Stocks to Consider

Ingevity has a market capitalization of approximately $3.1 billion. Other stocks worth considering in the industry include Kraton Corporation KRA, Ferro Corporation FOE and Ashland Global Holdings Inc. ASH. While both Kraton and Ferro sport a Zacks Rank #1, Ashland Global carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Kraton Corporation's earnings estimates for 2017 and 2018 improved over the last 60 days. Also, the company pulled off an average positive earnings surprise of 32.88% in the trailing four quarters.

Ferro Corporation delivered a positive average earnings surprise of 17.79% in the last four quarters. Its earnings estimates for 2017 and 2018 were revised upward over the past 60 days.

Ashland Global witnessed upward earnings estimate revisions for fiscal 2018 and fiscal 2019, over the past 60 days. The company delivered an average positive earnings surprise of 13.46% in the trailing four quarters.

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