Technology

Milacron Holdings (MCRN) Down 7.4% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Milacron Holdings (MCRN). Shares have lost about 7.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Milacron Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Milacron Q2 Earnings Beat Estimates, Revenues Miss

Milacron Holdingsdelivered adjusted earnings per share of 34 cents in second-quarter 2019, surpassing the Zacks Consensus Estimate of 32 cents. However, the bottom line declined 26% on a year-over-year basis.

Including one-time items, the company reported earnings per share of 7 cents in the second quarter, down 68% from the year-ago quarter’s figure of 22 cents.

Operational Update

Milacron’s revenues fell 10.6% year over year to $271.40 million during the second quarter. The top line missed the Zacks Consensus Estimate of $283 million. Excluding unfavorable impact of currency movements, revenues decreased 8.3% from the prior-year quarter figure. New orders in the reported quarter declined 26.4% year over year to $235.7 million.

Cost of sales during the April-June quarter went down 6% year over year to $184 million. Gross profit declined 19% year over year to $87 million. Gross margin came in at 32.1% during the second quarter compared with the year-ago quarter’s 35.2%.

Selling, general and administrative expenses fell 5% year over year to $58 million. Adjusted EBITDA went down 19% to $49.1 million in the reported quarter from $60.6 million in the prior-year quarter. Adjusted EBITDA margin contracted 190 bps to 18.1% in the quarter.

Segmental Results

Advanced Plastic Processing Technologies: Net sales declined 6% year over year to $138 million. Excluding $1.6 million of unfavorable impact of currency movements, sales declined 4.4% from the prior-year quarter. Adjusted EBITDA was up 2.6% year over year to $20 million.

Melt Delivery and Control Systems: Net sales declined 16% year over year to $104 million. Excluding unfavorable impact of currency movements of $4.3 million, sales decreased 12.8% from the prior-year period. Adjusted EBITDA slumped 27.4% year over year to $29 million.
 
Fluid Technologies: Sales for the reported quarter fell 11.9% year over year to $30 million. Sales dropped 8.3% from the year-ago period, excluding $1.2 million of unfavorable currency-movement impact. Adjusted EBITDA was $6 million, down from the prior year’s $8 million.

Financial Update

Milacron reported cash and cash equivalents of $152 million at the end of the second quarter, down from $184 million reported at the end of 2018. Net cash provided from operating activities were $1.1 million during the six-month period ended Jun 30, 2019, compared with $31.1 million reported in the comparable period last year.  Long-term debt was $825 million as of Jun 30, 2019, compared with $829 million as of Dec 31, 2018.

Merger Update

As announced on Jul 12, 2019, Milacron entered into an agreement with Hillenbrand, Inc., per which Hillenbrand will acquire Milacron in a cash-and-stock transaction, valued at $2 billion. The deal includes Milacron’s net debt of $686 million as of Mar 31, 2019. The transaction is expected to close in the first calendar quarter of 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -5.92% due to these changes.

VGM Scores

At this time, Milacron Holdings has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Milacron Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.