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Element Solutions Inc (ESI)
NYSE:ESI
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Element Solutions
(NYSE:ESI)
71Outperform
Positive Factors
Capital Allocation
Strengthening balance sheet allows management to prioritize capital allocation with all options on the table.
Financial Performance
The company reported a 9% year-over-year organic increase in EBITDA to $130 million, reflecting strong performance in leading-edge electronics.
Semiconductor Growth
The semiconductor segment showed strong organic growth, led by wafer-level and advanced packaging technologies, which provide a competitive advantage.
Negative Factors
Currency Headwinds
FX has gone against ESI and management expects an incremental impact in 4Q.
Earnings Impact
A higher tax rate and foreign exchange headwinds have led to a reduction in earnings per share estimates.
Trade and Market Challenges
Potential trade issues with China and declines in metal and chrome plating applications could pose challenges.
Element Solutions (ESI) vs. S&P 500 (SPY)
Market Cap
$5.72B
Dividend Yield1.29%
Average Volume (3M)3.90M
Price to Earnings (P/E)24.5
Beta (1Y)1.12
Revenue Growth5.30%
EPS Growth106.15%
CountryUS
Employees5,300
SectorBasic Materials
Sector Strength58
IndustryChemicals
Share Statistics
EPS (TTM)1.01
Shares Outstanding242,452,330
10 Day Avg. Volume7,013,689
30 Day Avg. Volume3,897,129
Financial Highlights & Ratios
PEG Ratio0.23
Price to Book (P/B)N/A
Price to Sales (P/S)2.49
Price to Cash Flow (P/CF)11.00
P/FCF Ratio12.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$30.86Price Target Upside30.76% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering7
Element Solutions Business Overview & Revenue Model
Company DescriptionElement Solutions Inc operates as a specialty chemicals company in the United States, China, and internationally. The company operates in two segments, Electronics, and Industrial & Specialty. The Electronics segment researches, formulates, and sells specialty chemicals and materials for various types of electronics hardware products. This segment also supplies solder technologies, fluxes, cleaners, and other attachment materials for the electronics assembly industry; proprietary liquid chemical processes to manufacture printed circuit boards; and advanced copper interconnects, die attachment, wafer bump processes, and photomask technologies for integrated circuit fabrication and semiconductor packaging. It primarily serves mobile communications, computers, automobiles, and aerospace equipment industries. The Industrial & Specialty segment provides industrial solutions, which include chemical systems that protect and decorate metal and plastic surfaces; consumable chemicals that enable printing image transfer on flexible packaging materials; and chemistries used in water-based hydraulic control fluids for offshore energy production applications. It serves aerospace, automotive, construction, consumer electronics, consumer packaged goods, and oil and gas production end markets. The company was formerly known as Platform Specialty Products Corporation and changed its name to Element Solutions Inc in January 2019. Element Solutions Inc was founded in 1785 and is headquartered in Fort Lauderdale, Florida.
How the Company Makes MoneyElement Solutions Inc generates revenue primarily through the sale of its specialty chemical products and solutions to a diverse customer base across multiple industries. The company's key revenue streams include electronics solutions, which provide advanced materials used in the manufacturing of electronic devices, and industrial solutions, which offer surface treatment chemicals for various applications. Additionally, ESI benefits from strategic partnerships and long-term contracts with leading manufacturers and suppliers, ensuring a steady demand for its products. The company's focus on innovation and sustainability also plays a significant role in its ability to attract and retain customers, contributing to its overall financial performance.
Element Solutions Financial Statement Overview
Summary
Element Solutions demonstrates a solid financial position with consistent revenue and profit growth, strong margins, and effective cash flow management. The company maintains stability with a manageable debt level and robust equity position. Despite operational fluctuations and increasing debt, its overall financial health is strong, well-positioning the company for industry challenges.Income Statement
Element Solutions has shown consistent revenue growth over the years, with a notable increase of 5.30% in the latest year. The company maintains a strong gross profit margin of 42.16% and an improving net profit margin of 9.94%. EBIT and EBITDA margins are solid, indicating efficient cost management. However, fluctuations in EBIT over the years suggest some operational challenges.75
Positive
Balance Sheet
The balance sheet reflects stability with an equity ratio of 48.89% in the latest year, demonstrating solid financial footing. The debt-to-equity ratio is moderate at 0.77, indicating manageable leverage. Return on equity is healthy at 10.24%, showing effective use of shareholders' equity. However, the increase in total debt poses a potential risk if not managed well.68
Positive
Cash Flow
Operating cash flow has been consistently strong, with a notable increase in free cash flow over the years. The free cash flow to net income ratio of 1.20 suggests effective cash generation relative to earnings. The operating cash flow to net income ratio of 1.48 underscores strong cash-generating capabilities. However, investing cash flow remains negative, which could indicate significant capital expenditure or investment needs.72
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 2.46B | 2.33B | 2.55B | 2.40B | 1.85B | Gross Profit |
| 1.04B | 918.50M | 952.70M | 960.80M | 786.00M | EBIT |
| 343.90M | 173.60M | 325.30M | 299.90M | 181.00M | EBITDA |
| 343.90M | 345.10M | 496.10M | 475.50M | 305.70M | Net Income Common Stockholders |
| 244.20M | 118.10M | 187.20M | 203.30M | 75.70M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 359.40M | 289.30M | 265.60M | 330.10M | 291.90M | Total Assets |
| 4.87B | 4.97B | 4.90B | 5.14B | 4.48B | Total Debt |
| 1.82B | 1.95B | 1.90B | 1.91B | 1.52B | Net Debt |
| 1.46B | 1.66B | 1.63B | 1.58B | 1.22B | Total Liabilities |
| 2.48B | 2.63B | 2.55B | 2.64B | 2.17B | Stockholders Equity |
| 2.38B | 2.33B | 2.33B | 2.48B | 2.32B |
| Cash Flow | Free Cash Flow | |||
| 293.60M | 280.90M | 253.50M | 279.70M | 232.50M | Operating Cash Flow |
| 362.00M | 333.60M | 301.30M | 326.00M | 261.30M | Investing Cash Flow |
| -73.80M | -250.20M | -75.20M | -568.90M | -39.90M | Financing Cash Flow |
| -206.60M | -58.70M | -275.60M | 290.00M | -123.60M |
Element Solutions Technical Analysis
Negative
23.60
Price Trends
25.66
Negative
26.34
Negative
26.19
Negative
Market Momentum
-0.26
Positive
33.79
Neutral
11.48
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ESI, the sentiment is Negative. The current price of 23.6 is below the 20-day moving average (MA) of 25.37, below the 50-day MA of 25.66, and below the 200-day MA of 26.19, indicating a bearish trend. The MACD of -0.26 indicates Positive momentum. The RSI at 33.79 is Neutral, neither overbought nor oversold. The STOCH value of 11.48 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ESI.
Element Solutions Risk Analysis
Element Solutions disclosed 33 risk factors in its most recent earnings report. Element Solutions reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Element Solutions Peers Comparison
Overall Rating
UnderperformOutperform
Sector (47)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $219.78B | 33.88 | 16.87% | 1.20% | 0.46% | 7.97% | |
75 Outperform | $10.27B | 11.67 | 16.11% | 3.64% | 1.91% | 2.94% | |
71 Outperform | $5.72B | 24.55 | 10.30% | 1.29% | 5.30% | 106.15% | |
54 Neutral | $19.86B | 81.04 | 1.71% | 2.06% | 0.04% | ― | |
53 Neutral | $2.14B | 24.15 | 12.98% | 7.23% | -4.05% | ― | |
47 Neutral | $2.71B | -3.60 | -20.77% | 3.28% | 3.41% | -27.70% | |
42 Neutral | $8.79B | ― | -12.18% | 2.13% | -44.08% | -183.44% |
* Basic Materials Sector Average
Performance Comparison
ESI
Element Solutions
23.60
-1.09
-4.41%
ALB
Albemarle
72.19
-54.71
-43.11%
EMN
Eastman Chemical
88.92
-8.05
-8.30%
IFF
International Flavors & Fragrances
78.18
-6.67
-7.86%
CC
Chemours Company
14.29
-12.99
-47.62%
LIN
Linde
464.73
7.09
1.55%
Element Solutions Earnings Call Summary
Earnings Call Date: Feb 18, 2025 | % Change Since: -10.30% | Next Earnings Date: Apr 23, 2025
Earnings Call Sentiment Positive
Element Solutions reported a strong fiscal year with record-breaking adjusted EBITDA and free cash flow, strategic portfolio improvements, and significant growth in the electronics segment. However, the company faced challenges from foreign exchange headwinds and softness in industrial markets. While the positive achievements and strategic positioning for future growth are noteworthy, ongoing concerns about tariffs and FX impacts pose potential risks.Highlights
Record-Breaking Adjusted EBITDA and Free Cash Flow
Adjusted EBITDA grew 13% in constant currency to a record $535 million, with free cash flow also reaching a record $294 million. This marks the fifth year in the past six where more than 50% of adjusted EBITDA was converted to free cash flow.
Successful Strategic Portfolio Adjustment
Element Solutions announced the sale of McDermott Graphics Solutions for $325 million, improving portfolio growth and margins while maintaining a strong balance sheet.
Strong Growth in Electronics Segment
The electronics business grew 7% organically, with Semiconductor Solutions achieving 14% growth and surpassing $300 million in revenue for the first time. Circuitry Solutions grew 12% organically.
Positive Margin Expansion and Investment in Capabilities
Adjusted EBITDA margins improved by 120 basis points due to favorable product mix and price discipline. CapEx was $68 million, focused on strategic investments.
Solid Balance Sheet and Leverage Management
Net leverage was reduced to 2.8 times, with no debt or swap maturities until 2028 and effective borrowing costs below 4%.
Lowlights
Foreign Exchange Headwinds
Foreign exchange translation presented a $12 million year-on-year headwind to adjusted EBITDA, with current rates indicating further FX headwinds in 2025.
Softness in Industrial and Automotive Segments
Industrial and specialty segment declined 1%, with industrial solutions falling 2% organically due to soft European markets and lower commodity price-based surcharges.
Potential Tariff and Demand Risks
There is uncertainty surrounding potential tariffs and their impact on demand, particularly in the INS segment.
Company Guidance
During the Element Solutions Fourth Quarter and Full Year 2024 Financial Results Conference Call, the company provided guidance for 2025, projecting high single-digit adjusted EBITDA growth at the midpoint of their range, despite anticipating a $30 million impact from the sale of McDermott Graphics Solutions and a $15 million foreign exchange headwind. For 2024, Element Solutions achieved a record adjusted EBITDA of $535 million, marking a 13% increase in constant currency, alongside a record free cash flow of $294 million. The company converted more than 50% of adjusted EBITDA to free cash flow for the fifth time in six years, despite increased capital expenditures. The electronics segment saw 7% organic growth, driven by strong demand in emerging technologies such as AI and electric vehicles. For 2025, Element Solutions expects continued high single-digit organic growth in the electronics segment, driven by high-performance computing and electric vehicles, with a potential upside from a stronger refresh cycle in smartphones and computing devices. The company also noted that their balance sheet is in a strong position, with net leverage at 2.8 times and an effective borrowing cost below 4%, providing substantial capacity for capital deployment in 2025.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.