The specialty chemical companies are thanking their lucky stars
that North American manufacturing remains robust. Quaker Chemical
) still managed a first quarter sales gain of 11% despite a
slowdown in China and Europe. This Zacks #1 Rank (Strong Buy) is a
value stock with a forward P/E of 11.2.
Quaker's chemical business is a barometer of the global economy
because while it is headquartered in Pennsylvania, it has a
presence in every major manufacturing country in the world. It also
has regional headquarters in the growth powerhouses of Brazil and
The company produces process chemicals and specialty chemicals for
some of the key building block industries such as primary metals
Quaker Beat By 33.8% In The First Quarter
On Apr 30, Quaker reported its first quarter results and easily
surprised on the Zacks Consensus Estimate by 23 cents. Earnings per
share were 91 cents compared to the consensus of just 68 cents. It
was the third beat in the last 4 quarters.
Sales rose 11% to $177.6 million from $159.9 million a year ago.
The ongoing recovery in North American manufacturing helped offset
the sluggishness in Europe and China.
Product volumes also climbed by about 5%, including acquisitions.
Higher selling prices and mix also boosted revenue by 8%. The price
increases were implemented in 2011 to help offset rising raw
Uncertainty For 2012
While Quaker didn't warn about 2012 in April, it didn't exactly
sound completely bullish either.
Higher raw material costs are biting again. It was beginning to
institute price increases but that would take several months.
Meanwhile, margins were expected to be impacted.
Additionally, the global economy remains mixed. Many regions were
expected to remain soft.
The company didn't exactly get out the pompoms and cheer for 2012.
The 2012 Zacks Consensus Estimate Rises
Yet despite all the uncertainty, four estimates were revised higher
for the full year in the last month. The 2012 Zacks Consensus rose
about 0.1% to $3.52 from $3.32 in the prior 30 days.
That is continued earnings growth of 8.4%.
Valuations Still Look Attractive
Despite rising earnings estimates, Quaker remains a value stock.
In addition to a P/E of just 11.2, the company has a price-to-book
ratio of 1.9. That is under the industry average of 2.2.
Quaker also has a stellar price-to-sales ratio of 0.7. The S&P
500 averages, by contrast, a P/S of 2.1. A P/S ratio under 1.0
usually indicates value.
The company has other solid fundamentals including a 1-year return
on equity (ROE) of 17.2%. That is also under the industry average
Shareholders are also rewarded with a solid dividend, currently
Quaker is an interesting global play on the manufacturing sector.
It's definitely one to watch for signs of a slowdown, or recovery,
in key markets.
Tracey Ryniec is the Value Stock Strategist for
. She is also the Editor of the Turnaround Trader and Insider
Trader services. You can follow her on twitter at
QUAKER CHEMICAL (KWR): Free Stock Analysis
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