A. Schulman Inc. (SHLM) has been acquiring new businesses in the last 4 months as the global recession eases. SHLM has surprised on the Zacks Consensus Estimate 3 out of the last 4 quarters by an average of 91.9%.
Company Description
A. Schulman manufactures high-performance plastic compounds and resins including engineered plastic compounds, color concentrates and additives that improve the appearance and performance of plastics.
Its products are components in construction and home improvement products, medical products, garden supplies and toys.
The company operates globally, with 16 manufacturing facilities in North America, Europe, Mexico and the Asia-Pacific region.
A. Schulman Acquires McCann Color, Inc.
A. Schulman has been expanding as the economy recovers.
In Dec 2009, the company announced the acquisition of ICO, Inc., a specialty resins and concentrates manufacturer for $191.4 million in cash and shares. ICO has annual revenue of about $300 million.
It is expected to close this spring and will be accretive to earnings for fiscal 2010.
Following that larger acquisition, on Mar 1, A. Schulman announced it had purchased McCann Color, a producer of color concentrates in North Canton, Ohio, for less than $10 million in cash.
At the same time, the company announced it was closing its Polybatch Color Center in Sharon Center, Ohio and will consolidate the two facilities. The acquisition and consolidation is expected to be completed by the end of fiscal 2010, which is Aug 31, 2010.
The company will not realize the full effect of the deal until fiscal 2011.
Full Year Zacks Consensus Estimates Rise
A. Schluman is expected to report fiscal second quarter results on Mar 31, after the close. The Zacks Consensus Estimates for the quarter and 2010 jumped after the company reported fiscal first quarter results in early January and have been holding steady ever since.
The second quarter Zacks Consensus rose 8 cents to 23 cents in the last 90 days.
Fiscal 2010 estimates took an even bigger leap, jumping 50.8% to $1.84 from $1.22 per share in the last 3 months.
A. Schulman Beat by 91.9% in the Fiscal First Quarter
For the fiscal first quarter, A. Schulman reported a big earnings surprise. On Jan 6, the company beat by 32 cents. Earnings per share were 75 cents compared to the Zacks Consensus of 43 cents.
Sales declined by 6.6% to $362.9 million from $388.3 million in the year ago quarter.
Tonnage fell 4.5% in the quarter reflecting continuing weak end markets, actions to reduce capacity and ongoing efforts of the North American Engineered Plastics segment to move away from low-margin business.
The company was optimistic about fiscal 2010. It saw improvement across all of its business lines in the first quarter but some of that was likely due to a bubble effect of the global auto incentive programs.
It has also been improving its product mix and reducing its manufacturing costs.
Given all the positive signals, the company expects net income for the second quarter to be significantly better than the prior-year period.
Value Fundamentals
A. Schulman is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 14.1, which is within the value parameters. It has a price-to-book ratio of 1.7, also within the value parameter as it’s under 3.0.
A. Schulman pays a dividend with a yield of 2.3%, which is much better than the industry average which is 0%.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
