INVESTMENT THESIS


Ashland Global Holdings Inc. (NYSE: ASH) with a price target of $94.
RECENT DEVELOPMENTS


The higher earnings were driven by EBITDA margin growth (up 70 basis points); and lower SG&A expenses, which fell 5% from the prior year. Adjusted EBITDA of $154 million rose 3%.
Fourth-quarter revenue was comparable to the prior-year quarter at $609 million.
Ashland now reports results for three operating segments: Consumer Specialties (56% of 2020 sales), Industrial Specialties (38% of sales), and Intermediates & Solvents (6% of sales).
Consumer Specialties reported 4Q20 sales of $344 million, up 4% from the prior-year quarter. Results in the life sciences and personal care & household end markets were especially strong. Adjusted segment income rose to $62 million from $53 million a year earlier.
Industrial Specialties (including specialty and performance adhesives) posted 4Q sales of $240 million, down 3% from the prior-year quarter on lower volume, which more than offset modestly higher pricing. Industrial demand rose strongly from the June quarter, driven by sales of architectural coatings and building and construction adhesives. Segment operating income rose to $39 million from $37 million, largely due to cost reduction initiatives.
The Intermediates & Solvents division reported fiscal 4Q sales of $28 million, down from $42 million in the prior-year period on lower pricing and volume. The results were due in part to weaker demand and pricing for butanediol in North America. The segment posted an operating profit of $3 million, down from $9 million in 4Q19.
The expected proceeds of $85-$90 million will be used to retire debt.
EARNINGS & GROWTH ANALYSIS


Ashland is not providing financial guidance, but does plan to host an Investor Day in mid-2021. Management has highlighted the company’s cost-cutting initiatives and exit from less profitable businesses.
We are also setting an FY22 EPS estimate of $4.32, up 16% from our FY21 estimate. The consensus is $4.58.
FINANCIAL STRENGTH & DIVIDEND


The total debt/total capitalization ratio was 39.7%. The company has minimal short-term borrowings.
MANAGEMENT & RISKS


Guillermo Novo became the company’s new chairman and CEO on December 31, 2019, succeeding William A. Wulfsohn. Following Mr. Wulfsohn’s departure, the board consists of 10 members, including nine independent directors.
COMPANY DESCRIPTION


Founded in 1924, Ashland Global Holdings Inc. is a global specialty chemicals company.
VALUATION


Our rating on Ashland remains BUY with a target price of $94.
On November 20 at midday, BUY-rated ASH traded at $77.33, down $0.80.
Source: Argus