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Is Univar (UNVR) Likely to Disappoint This Earnings Season?

Univar IncUNVR is expected to release first-quarter 2016 results ahead of the bell on May 4. 

Univar is a global distributor of chemicals and innovative services, offering solvents, resins, pigments, acids, bases, surfactants, glycols, inorganic compounds and alcohols. It also provides transportation and warehousing infrastructure, chemicals and hazardous materials’ handling services. The company serves the coatings and adhesives, food, oil and gas, personal care and pharmaceutical industries.

In the last quarter, this chemical company had delivered a negative earnings surprise of 133.33%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Univar intends to continue implementing initiatives targeted at growth. The company plans to continue its pursuit of several acquisitions after the four buyouts completed in the last quarter of 2015. The first quarter of 2016 also saw a few acquisitions that are likely to provide positive synergies. The company is also executing several cost saving programs.

Univar reported revenues of $1,966.3 million in the fourth quarter of 2015, down 17.6% from the year-ago quarter owing to lower demand from upstream oil and gas markets, and negative currency translation from a stronger dollar. The company’s net loss narrowed to $2.9 million from $82.6 million in the prior-year quarter.

The company expects lower global demand for basic and specialty chemicals across the end markets to which it caters. It also foresees a downtrend in chemical pricing and unfavorable currency translation in the first half of the current year. However, organic growth is expected to partly offset these headwinds.

For first-quarter 2016, the company forecasts adjusted EBITDA (on a reported basis) to be roughly 10% lower than $129.6 million reported in fourth-quarter 2015.

The company expects its asset-light business model, which provides stability, to sustain in the current macroeconomic environment. It provided an uncertain outlook for the industry for the first quarter of 2016.

Earnings Whispers

Our proven model does not conclusively show that Univar is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for Univar is currently pegged at 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate both stand at 10 cents.

Zacks Rank: Univar carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies in the basic materials sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

The Scotts Miracle-Gro Company SMG has an Earnings ESP of +1.20% and a Zacks Rank #2 (Buy).

Orion Engineered Carbons SA OEC has an Earnings ESP of +13.79% and a Zacks Rank #3 (Hold).

Albemarle Corporation ALB has an Earnings ESP of +1.18% and a Zacks Rank #3. 

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ALBEMARLE CORP (ALB): Free Stock Analysis Report
ORION ENGINRD (OEC): Free Stock Analysis Report
SCOTTS MIRCL-GR (SMG): Free Stock Analysis Report
UNIVAR INC (UNVR): Free Stock Analysis Report
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