) is poised for growth as demand increases from the core markets
that it serves. The specialty chemicals maker, best known for its
Valvoline automotive lubricants, has racked up eleven positive
earnings surprises in the last twelve quarters and hit its new
52-week high on August 10, 2012.
This Zacks #2 Rank (Buy) deserves to be on aggressive growth
investors' watch lists due to its flurry of earnings beats, strong
demand from energy and construction markets, strength across
multiple areas, an above-average long-term earnings growth
projection of 16.6% and attractive synergies from an acquisition.
Seven Straight Beats
On July 26, Ashland reported a positive earnings surprise of 13.3%
for its third-quarter fiscal 2012 (ended June 30). Adjusted
earnings of $2.04 per share outperformed the Zacks Consensus
Estimate of $1.80, marking the seventh straight positive surprise.
Profit from continuing operations more than doubled year over year
to $160 million, boosted by a strong performance from the core
Specialty Ingredients segment and the acquisition of International
Specialty Products Inc ("ISP"). The roughly $3.2 billion
acquisition has boosted Ashland's position in high-growth markets
such as energy, personal care and pharmaceutical.
Revenues jumped 23.5% year over year to $2.1 billion. The company
saw significant demand in the energy market in the quarter, leading
to accelerated growth of its specialty additives.
While the Specialty Ingredients division delivered double-digit
growth in the quarter, sales fell across the Performance Materials,
Consumer Markets and Water Technologies segments. Operating income
more than doubled over the prior-year quarter to $263 million.
Earnings Estimates Cruising
All nine estimates for fiscal 2012 have been revised higher in the
last 30 days, raising the Zacks Consensus Estimate by 49 cents (or
8.2%) to $6.50 per share. This reflects a projected annualized
growth of roughly 31.9%.
Six estimates out of eight have moved higher for fiscal 2013 in the
last 30 days, sending the Zacks Consensus Estimate up by 18 cents
(or 2.5%) to $7.51 per share. This represents an estimated year
over year growth of 15.5%. However, there has been a solitary
downward revision as well over the same period.
Ashland is currently trading at a forward P/E of 11.21x, on par
with the peer group average. The price-to-book of 1.37x is much
lower than the peer group average of 3.08x. Moreover, the company
has a PEG ratio of 0.68, a 32% discount to the benchmark of 1 for a
fairly priced stock.
Chart Shows Potential
The price and consensus chart demonstrates that the earnings
estimate lines for fiscal 2012 and 2013 are hovering above the
stock price, indicating that Ashland is undervalued. The strong
earnings growth potential has been captured by the gap between the
estimate lines for fiscal 2011, 2012 and 2013.
Founded in 1918, Ashland Inc. makes nickel and cobalt-based alloys
in sheet, coil and plate forms. It operates through four segments,
namely Specialty Ingredients, Water Technologies, Performance
Materials and Consumer Markets. The company's Consumer Markets
segment markets Valvoline, the world's first lubricating oil. It
also operates the Valvoline Instant Oil Change, the nation's
second-largest franchised quick-lube chain with roughly 870
locations. Ashland, which has a market cap of roughly $5.8 billion,
offers specialty chemicals in more than 100 countries.
ASHLAND INC (ASH): Free Stock Analysis Report
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