Shares of Ashland (ASH 0.90%) jumped 15.9% on Wednesday after the specialty materials company delivered better-than-feared quarterly results and encouraging forward guidance.
Ashland delivers amid improving demand trends
For its fiscal first quarter of 2024 ended Dec. 31, 2023, Ashland's sales declined 10% year over year to $473 million, translating to adjusted (non-GAAP) net income of $0.45 per share (down from $0.97 per share a year earlier). Analysts, on average, were expecting adjusted earnings of only $0.19 per share, albeit on slightly higher revenue of $478 million.
Management noted that market-demand dynamics remained roughly consistent as previously communicated. In particular, it said year-over-year volume declines have begun to abate and stabilize across most end markets. Ashland's earnings were bolstered by favorable pricing within its life sciences and personal care segments, as well as its repurchase of another $100 million of Ashland shares during the quarter.
"While we are cautiously optimistic about the improving demand trends we experienced in January with follow-through order build into February, we continue to prudently manage inventory levels and drive cash generation," stated Ashland CEO Guillermo Novo. Novo added that customer ordering lead times have normalized to pre-COVID levels.
What's next for Ashland investors?
For its current fiscal second quarter, Ashland sees sales ranging from $565 million to $585 million -- well above analysts' consensus estimates of $561 million -- with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $115 million to $125 million. For the full fiscal-year 2024, Ashland expects revenue of $2.15 billion to $2.25 billion -- the midpoint again comfortably ahead of Wall Street's estimates of $2.16 billion -- with adjusted EBITDA of $460 million to $500 million.
In the end, this was as solid a quarter as any investor could have asked as Ashland works to return to sustained top-line growth. The stock is simply responding in kind.
