IBD Stock Analysis
- Element Solutions stock is nearing a 24.80 buy point.
- Shares offered an early entry as it cleared short-term resistance just above 24.
- The relative strength line is trending up and just below highs.
Industry Group Ranking
* Not real-time data. All data shown was captured at
1:24PM EDT on
The company makes specialty chemicals used in electric vehicles, 5G smartphones and AI technology. It’s seeing strong momentum in its core industrial and electronics end markets. Meanwhile, strategic acquisitions are fueling double-digit earnings and revenue growth.
A staid chemicals-industrials name like ESI stock can balance out the flashier names in a tech-heavy portfolio. That’s especially useful in an uncertain market like the current one.
ESI Stock Technical Analysis
Last week, Element Solutions offered an early entry as it cleared short-term resistance just above 24. The relative strength line is trending up and just below highs, a sign of outperformance vs. the S&P 500. The RS line has rallied after moving sideways for multiple years.
The RS Rating for ESI stock is a superior 92 out of a best-possible 99. That means it has outperformed 92% of all stocks over the past year. The Composite Rating, which combines key fundamental and technical metrics in a single, easy-to-use score, is a near-perfect 98. In fact, ESI is a top-ranked company in IBD’s specialty chemicals industry group, which itself ranks No. 52 out of 197 groups.
But the Accumulation/Distribution Rating, which reflects institutional buying and selling in a stock, is a middling C-. ESI stock also shows zero quarters of rising fund ownership, according to the IBD Stock Checkup tool.
Element Solutions Earnings
In its Q2 report last month, Elements Solution posted 94% earnings growth. Analysts see the company’s EPS climbing 55% in the current quarter and 44% in all of 2021. Revenue is seen growing 23% for the year.
In Q2, electronics sales jumped 51% and industrial sales advanced 53%, lapping the most Covid-hit quarter of 2020. Minus acquisitions, electronics sales still grew 25% and industrial sales rose 41%, even though the automotive chip shortage weighed on its business. Strength in the broader construction and machinery markets offset weakness in automotive.
Record electronics demand in a lingering pandemic has affected chip supplies in the auto markets. But, Element Solutions said, it’s “benefiting from this demand in electronics more than we are suffering from the automotive market slowdown.”
Overall, it sees supply challenges as the result of a strong economic recovery.
“Our teams have been navigating supply-chain constraints and raw-material shortages attentively to meet the robust demand in our end markets,” ESI CEO Benjamin Gliklich said in a statement.
“Our core markets continue to see the benefits of the expanding secular megatrends of increasing electronics and automotive applications, rising adoption of electric vehicles, and increasing content in 5G-enabled mobile devices,” he added on an earnings call.
The company sees its “highly strategic acquisitions” fueling growth, offset by rising materials and logistics costs.
In June, the Miami-based company offered to buy France’s Coventya, which provides protective and decorative coatings for parts used in the automotive, aviation and construction industries. It purchased Kester from Illinois Tool Works (ITW) in 2019 and H.K. Wentworth in May.
In June, Element hiked full-year 2021 EPS guidance. “We expect demand to remain strong through the third quarter in our key end markets,” with deceleration in Q4, Glicklich said.
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