A. Schulman, Inc. (SHLM) recently delivered strong second quarter results, including an 18% earnings beat. Analysts revised their estimates higher off the strong quarter, sending SHLM to a Zacks #2 Rank (Buy).
Based on current consensus estimates, the company is expected to grow its EPS by 11% in 2011 and 19% in 2012. Despite this solid growth, shares are trading at less than 13x forward earnings.
It also pays a dividend that yields a solid 2.5%.
A. Schulman manufactures high-performance plastic compounds and resins used in a variety of consumer, industrial, automotive and packaging applications.
Second Quarter Results
A. Schulman reported its results for the second quarter of 2011 on April 4. Earnings per share came in at 39 cents, beating the Zacks Consensus Estimate by 6 cents.
Net sales for the quarter were $508.3 million, a 54% increase from the same quarter in 2010. The increase was due in large part to the acquisition of ICO, but organic sales and volume growth was still strong.
The increase in sales allowed the company to leverage its selling, general and administrative expenses, which fell from 14.7% of sales to 9.7% in the quarter. This led to a huge jump in operating income.
Outlook
Analysts revised their estimates higher for both 2011 and 2012 off the strong quarter, sending the stock to a Zacks #2 Rank (Buy).
The 2011 Zacks Consensus Estimate is now $1.92, up from $1.84 prior to the earnings beat, and representing 11% growth over 2010 EPS.
The 2012 consensus estimate rose from $2.16 before the surprise to $2.27. This implies 19% EPS growth in 2012.
Dividend
A. Schulman has been slowly raising its dividend over the last several years:
It currently yields a solid 2.5%.
Shares of SHLM appear cheap with a forward P/E of 12.9x, a discount to the industry average of 15.2x.
Its price to book ratio of 1.5 is also a discount to the peer group multiple of 2.6.
A. Schulman, Inc. is headquartered in Akron, Ohio and has a market cap of $779 million.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
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