Ashland's Q3 Earnings Miss Estimates, Sales Beat on Volume Growth

Sales increased 7% year over year to $497 million. The top line surpassed the Zacks Consensus Estimate of $486.2 million. Sales volumes rose 6%, with gains across all business units, while pricing increased around 1%. Favorable foreign currency movements contributed $3 million to sales. 

Ashland Inc. Price, Consensus and EPS Surprise

ASH’s Segment Highlights

Life Sciences: Sales in the segment increased 11% year over year to $180 million in the reported quarter. The figure surpassed the Zacks Consensus Estimate of $169.5 million. The year-over-year improvement was driven by higher volumes, broad-based pharmaceutical demand across regions and product categories, strength in high-purity excipients and injectables, customer order timing and favorable pricing. 

Personal Care: Sales in the division increased 5% year over year to $155 million. The metric beat the consensus estimate of $154 million. Growth reflected higher volumes across end markets and regions, including strength in skin care, hair care, oral care and home care, along with robust demand for biofunctional actives and microbial protection. 

Specialty Additives: Sales in the segment increased 4% year over year to $136 million and missed the Zacks Consensus Estimate of $139 million. Favorable pricing and mix, continued growth in coatings and performance specialties, share gains and strong commercial execution more than offset weakness in construction and energy and resources. 

Intermediates: Sales in the segment rose 12% year over year to $37 million and beat the consensus estimate of $34 million. The increase reflected higher merchant sales, supported by improving N-Methyl-2-pyrrolidone demand from North American electric-vehicle battery and energy-storage customers, as well as higher captive butanediol sales. 

ASH’s Financials

Cash flows provided by operating activities were $121 million, up from $114 million in the prior-year quarter, primarily reflecting working-capital improvements. Ongoing free cash flow was $103 million compared with $108 million a year ago, with conversion remaining above 90% in both periods. Ashland ended the quarter with net leverage of 2.4 times, returning to its long-term target range. 

ASH’s Outlook

For fiscal 2026, Ashland reaffirmed sales guidance of $1.835-$1.870 billion and adjusted EBITDA outlook of $385-$400 million. The company revised its adjusted EPS outlook, excluding intangible amortization, to low-to-mid-single-digit growth from mid-to-high-single-digit growth due to a higher tax rate associated with unfavorable discrete items. Ongoing free cash flow conversion is expected to exceed 50% of adjusted EBITDA, with capital expenditures of approximately $90 million. Management expects continued sequential improvement in the fourth quarter as operations improve and recent pricing actions gain traction. 

ASH’s Price Performance

Shares of Ashland have gained 35.5% over the past year compared with a 2.7% rise in its industry. 

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ASH’s Zacks Rank & Key Picks

ASH currently carries a Zacks Rank #3 (Hold). 

Some better-ranked stocks in the Basic Materials space are The Chemours Company CC, Carpenter Technology Corporation CRS and Ternium S.A. TX.  

Chemours is expected to report second-quarter results on Aug. 4. The Zacks Consensus Estimate for CC’s second-quarter earnings is pegged at 43 cents per share. It carries a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here. 

CRS is slated to report fiscal fourth-quarter results on July 30. The Zacks Consensus Estimate for earnings is pegged at $3.03 per share. CRS has a Zacks Rank #1 at present.

Ternium is scheduled to report second-quarter results on Aug. 4. The Zacks Consensus Estimate for TX’s second-quarter earnings is pegged at $1.29 per share. It currently carries a Zacks Rank #1.

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