Avient Q2 sales up 2% YoY to $867mln, EPS $0.57, narrows FY23 EPS guidance.

• Avient reports Q2 2025 sales of $867M, up 2% YoY, with a 1% FX impact. • GAAP EPS at $0.57, compared to $0.36 in the prior year quarter. • Adjusted EPS of $0.80, exceeding previous guidance of $0.79, a 5% YoY growth. • Full-year adjusted EPS guidance narrowed to $2.77 to $2.87. • Q2 cash flow from operations at $113M, supporting $50M debt repayment.

The Franklin Small Cap Value Fund (FVADX) reported strong performance during the second quarter of 2025, driven by robust stock selection and sector allocations. The fund's Advisor Class shares received a 4-star rating from Morningstar as of June 30, 2025, outperforming its benchmark, the Russell 2000 Value Index, for the quarter [1].

Key Takeaways:

1. Market Performance: US small-cap stocks, as measured by the Russell 2000 Index, advanced during the second quarter of 2025, despite volatility. The rally was fueled by temporary delays in tariff hikes, reduced recession fears, interest rate cut expectations, and easing geopolitical tensions [1].

2. Contributors and Detractors: Stock selection and an overweight in industrials, as well as an underweight in real estate and health care, contributed to relative returns. QinetiQ Group (OTCPK:QNTQF), Babcock International (OTCPK:BCKIF), and Elementis (OTCPK:ELMTY) were among the top contributors. Detractors included ACI Worldwide (ACIW), Cable One (CABO), and Avient (AVNT) [1].

3. Performance Review: The Fund outperformed its benchmark for the quarter ended June 30, 2025. QinetiQ and Babcock International contributed significantly to performance, with the former benefiting from share repurchases and defense spending prospects, and the latter from a boost in nuclear and marine business growth [1].

4. Avient Performance: Avient, a detractor in the quarter, reported Q2 2025 sales of $867M, up 2% year-over-year (YoY) with a 1% foreign exchange (FX) impact. GAAP earnings per share (EPS) were $0.57, compared to $0.36 in the prior year quarter. Adjusted EPS of $0.80 exceeded previous guidance of $0.79, representing a 5% YoY growth. Full-year adjusted EPS guidance narrowed to $2.77 to $2.87. Q2 cash flow from operations was $113M, supporting $50M debt repayment [2].

Outlook:

While the fund's performance is encouraging, uncertainty surrounding trade and geopolitics could continue to be destabilizing factors in the near term. Economically sensitive small-cap stocks are down about 10% from post-election highs. A more favorable interest rate environment and clarity around trade policy would likely support near-term appreciation. The fund will continue to focus on identifying opportunities to improve the quality of positions at relatively attractive valuations [1].

References:

[1] https://seekingalpha.com/article/4807458-franklin-small-cap-value-fund-2024-commentary-q2-2025-commentary
[2] https://www.avient.com/financials/quarterly-reports/