Ashland falls on revenue miss despite Q1 earnings beat
Specialty chemicals maker narrows full-year guidance as Calvert City disruptions create temporary headwinds
Ashland Global Holdings Inc. shares declined as much as 4.7% on Tuesday after the specialty chemicals company reported quarterly revenue that fell short of Wall Street expectations, even as adjusted earnings per share topped estimates and life sciences operations delivered solid growth.
The Covington, Kentucky-based manufacturer posted first-quarter fiscal 2026 sales of $386 million, a 5% decrease from the prior-year quarter and well below analyst forecasts ranging from $402 million to $408 million. Excluding the impact of the Avoca divestiture, sales declined 3% year-over-year.
Despite the revenue shortfall, adjusted earnings of 26 cents per share exceeded the average analyst estimate of 23 cents. The company reported a net loss of $12 million, or 26 cents per diluted share, compared with net income of $32 million, or 67 cents per share, in the year-earlier period. Adjusted EBITDA fell 5% to $58 million, achieving a 15% margin.
Ashland narrowed its full-year fiscal 2026 adjusted EBITDA guidance to a range of $400 million to $420 million, down from the previous $400 million to $430 million outlook. The revision reflects approximately $11 million in temporary impacts expected during the second quarter from a startup delay at its Calvert City facility and recent weather-related disruptions.
"The first-quarter performance showcased disciplined execution and resilient results despite mixed demand," said Guillermo Novo, chair and chief executive officer of Ashland. "We achieved solid margins through cost actions, improved product mix, and portfolio optimization."
The Calvert City operational challenges represent a lingering issue from an equipment-related incident in September 2025 that took a production unit offline for repairs. That earlier incident was expected to result in approximately $10 million in fiscal 2026 Adjusted EBITDA impact, with the company now forecasting an additional $11 million in second-quarter temporary impacts from the resulting startup delay and weather disruptions.
Notably, the company generated operating cash flow of $125 million, a dramatic improvement from a $30 million use of cash in the prior-year quarter, bolstered by a $103 million tax refund related to the Nutraceuticals divestiture and disciplined working capital management. Ongoing free cash flow reached $26 million.
Segment performance showed diverging trends across the company's portfolio. Life Sciences emerged as a bright spot, with sales increasing 4% to $139 million driven by higher pharmaceutical application volumes and resilient demand. Adjusted EBITDA in the segment rose 11% to $31 million, achieving a 22% margin. Pharma achieved low-single-digit sales growth for the third consecutive quarter, supported by high-value cellulosic excipients, injectables, and tablet coatings.
Personal Care sales decreased 8% to $123 million, largely due to the $10 million impact from the Avoca divestiture. Excluding this transaction, sales declined just 1% despite muted demand, partially offset by strong growth in biofunctional actives and microbial protection. Adjusted EBITDA was $26 million, reflecting a 21% margin.
Specialty Additives faced more significant headwinds, with sales falling 11% to $102 million due to coatings weakness in China, competitive intensity in the Middle East, Africa, and India region, and softer North American demand. However, adjusted EBITDA improved to $15 million from a loss position, driven by strong cost performance and HEC network consolidation benefits.
Intermediates sales declined 6% to $31 million, primarily due to lower pricing across the butanediol value chain in an oversupplied market. Adjusted EBITDA fell to $1 million from $3 million, reflecting lower pricing and reduced operating leverage from early-quarter production disruptions at Calvert City.
Beyond the near-term operational disruptions, Ashland maintained its full-year sales guidance of $1.835 billion to $1.905 billion and expects adjusted diluted earnings per share excluding intangibles amortization expense to show double-digit plus growth. The company continues to target ongoing free cash flow conversion of approximately 50% of adjusted EBITDA, with capital expenditures of roughly $100 million.
The manufacturing optimization program remains on track to deliver about $30 million in cost savings for fiscal 2026, while the company continues realizing benefits from portfolio optimization initiatives, including the HEC network consolidation.
Analysts have maintained a generally positive outlook on Ashland despite the revenue miss, with a consensus recommendation score of 2.1 indicating moderate buy sentiment. The average analyst price target stands at approximately $65, implying upside from current levels around $61.56. Notably, several firms including UBS, Argus, and BMO Capital Markets have raised their price targets to $70 or $71 in recent months, reflecting confidence in the company's strategic positioning and long-term growth potential.
Ashland shares, which have gained nearly 5% since the start of the year but remain down about 3% over the past 12 months, face near-term pressure from the operational challenges and guidance reduction. However, management emphasized that early second-quarter sales trends are encouraging, and the company anticipates a typical seasonal cadence with stronger performance in the second half of the fiscal year.