After the close last night, A. Schulman (SHLM), a supplier of various packaging, electronics, and building materials, posted solid 1Q18 results while also reaffirming FY18 EPS guidance of $2.00-$2.22. In fact, it's fair to say the results were its strongest in at least two years, considering the sharp uptick in revenue growth and the degree of upside relative to expectations. Not surprisingly, the impressive report has shares jumping higher this morning with SHLM trading at new multi-year highs.
Before diving into the report in more detail, here is a little more background on the company. SHLM is a diverse industrial company that manufacturers and supplies a variety of plastic compounds and resins, offering many customized colors. It also sells composites, such as molding compounds, as well as concentrates that improve the performance, appearance, and processing of plastics. This includes antibacterial, flame retardant, ultra-violet, anti-fog, and antioxidant properties. Additionally, SHLM provides polymer products which provide structural integrity, and multi-component blends like nylons, polyesters and elastomers. It serves many different end markets, but some of the primary ones are packaging, building and construction, electronics, energy, personal care and hygiene, and mobility.
Circling back to its quarterly results, SHLM reported EPS of $0.55, easily topping the $0.44 Capital IQ consensus. The $0.11 beat was its widest beat since 4Q16 when it beat estimates by $0.15. On a growth basis, Non-GAAP EPS was up 12%. On the topline, revenue was up a healthy 12% as well to $674.6 million, also comfortably beating the $674.6 million consensus. This was its strongest revenue growth quarter since 3Q15.
In its earnings press release, management commented that business in both its Asia-Pacific and Latin America markets were robust, highlighted by accelerated volume and sales growth. From a product standpoint, engineered composites were a stand-out, driven by improvements in the oil field services. Strong performance from these geographies ad markets offset some ongoing softness in U.S.-Canada as the industry continues to grapple with raw material inflation.
Outside of the main headline numbers, SHLM's operating margin improved to 4.8% from 3.2% in the year ago period. Helping the cause here was a shift in its pricing, as it looked to curtail material inflation, leading to four out of five of its main operating segments posting positive operating profits.
The company also generated solid cash flow from operations of $25.5 million, which allowed it to pay down its debt by $25 million. SHLM also paid out a $0.205/share dividend during the quarter.
Wrapping up, SHLM's results demonstrate that business is healthy and accelerating. On that note, management stated that while FY17 was a reset year for the company, it anticipates that 2018 will be stronger recovery year and that it sees many opportunities to leverage the changes it has implemented over the past year.
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