Veritiv Corporation VRTV reported record earnings per share (EPS) of $6.12 in second-quarter 2022, surging 278% from the year-ago quarter’s levels. The bottom line beat the Zacks Consensus Estimate of $4.50. The upside was driven by double-digit organic sales growth and year-over-year adjusted EBITDA margin improvements across each of its segments.

Veritiv’s total revenues increased 9.8% year over year to $1,821 million. Cost of sales was up 7% year on year to $1,411 million in the reported rose 21% year over year to $409.8 million. The gross margin was 22.5% in the second quarter compared with the prior-year period’s 20.4%.

Adjusted EBITDA was $136 million, rising 85% from the year-earlier quarter’s levels. Adjusted EBITDA margin expanded to 7.5% from 4.4% in the prior-year quarter. With this, Veritiv delivered the 10th consecutive quarter of year-over-year improvement in adjusted EBITDA on operational improvements.

Veritiv Corporation Price, Consensus and EPS Surprise

Veritiv Corporation price-consensus-eps-surprise-chart | Veritiv Corporation Quote

Financial Position

Veritiv had cash and cash equivalents of $32.1 million as of Jun 30, 2022, down from $49.3 million held on Dec 31, 2021. Long-term debt was $398.3 million as of Jun 30, 2022, down from $499.7 million on Dec 31, 2021. The company ended the year with a net leverage ratio of 0.7.

Net cash generated from operating activities in the first half of 2022 was $62.3 million compared with the prior-year period’s $50.1 million. In the second quarter, the company repurchased around $94.4 million in shares under its share repurchase program of $200 million.

On May 2, 2022, Veritiv completed the Veritiv Canada, Inc. business sale to Imperial Dade. The company can now focus on its strategy to invest in high-growth, higher-margin businesses as well as geographies and capitalize on its industry-leading Packaging and Facility Solutions capabilities.

2022 Guidance Raised

Veritiv raised its net income guidance for 2022 to the range of $285-$315 million from the previous band of $270-$305 million. Earnings per share are expected to be between $19.50 and $21.50 compared with the previous expectation of $18.00-$21.00 for the year. Veritiv anticipates adjusted EBITDA in the range of $475-$505 million, up from the previous guidance of $445-$485 million.

Free cash flow for 2022 is expected to be $250 million, with a capital expenditure of around $30 million. Net cash provided by operating activities is projected to be $280 million.

Price Performance

Shares of Veritiv have skyrocketed 52% in a year against the industry’s 21.4% decline.

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Zacks Rank & Stocks to Consider

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

Some better-ranked stocks worth considering in the basic materials space include Cabot Corporation CBT, Ashland Global Holdings Inc. ASH and Albemarle Corporation ALB.

Cabot, currently carrying a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 22.5% for the current fiscal year. The Zacks Consensus Estimate for CBT's earnings for the current fiscal has been revised 0.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cabot’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.2%. CBT has gained around 32% over a year.

Ashland, currently carrying a Zacks Rank #2, has a projected earnings growth rate of 50.9% for fiscal 2022. The Zacks Consensus Estimate for ASH’s fiscal 2022 earnings has been revised 10.5% upward in the past 60 days.

ASH’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters. It has a trailing four-quarter earnings surprise of roughly 1.82%, on average. ASH shares are up around 20.9% in a year.

Albemarle has a projected earnings growth rate of 247% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised 7.8% upward in the past 60 days.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 20%. ALB has gained roughly 18% in a year. The company has a Zacks Rank #2.

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