Innophos Holdings Inc. (IPHS) has surprised on estimates 4 consecutive quarters by an average of 30.05%. The stock is cheap. IPHS trades at just 7.5x forward earnings.
Company Description
Innophos Holdings manufactures specialty phosphates. Operating as a holding company, it offers products to customers for use in food and beverages, pharmaceuticals and other industrial applications. The company operates 7 manufacturing facilities in the U.S., Canada and Mexico.
Innophos Surprised by 81.58% in the Third Quarter
On Nov 2, Innophos reported third quarter results that easily beat the Zacks Consensus Estimate by 31 cents. Earnings per share were 69 cents compared to the Zacks Consensus of 38 cents. However, this was well under the third quarter of 2008 in which the company reported earnings of $3.62 per share but the third quarter of 2008 was also a record quarter for the company.
Revenue fell 44.5% to $161.9 million from $129.9 million in the record quarter a year ago. Decreases in selling prices, especially in Mexico, negatively impacted revenue by $72 million.
It’s impossible to compare the quarter to the year ago period given that it was a record quarter. Instead, comparisons to the second quarter of 2009 are more favorable. Revenues in the U.S. and Canada were essentially unchanged quarter over quarter with specialty salts and specialty acids up 3.7%.
Mexico continued to have economic challenges and volumes were lower across all product lines. However cost reduction initiatives improved profitability in that region.
Fourth Quarter Outlook
The company expects fourth quarter volumes to be similar to the third quarter, which saw the U.S. and Canada post increases while Mexico was weak. The pace of the decline in selling prices lessened in the third quarter and while Innophos expects further declines in the fourth quarter, it also expects the pace to significantly slow.
Zacks Consensus Estimates Rise
Give the big beat in the third quarter, covering analysts have been raising fourth quarter and full year estimates over the last month. The Fourth Quarter Zacks Consensus Estimate rose 17 cents to 41 cents in that time.
The full year estimate jumped 15.4% to $3.30 from $2.86 in the past 30 days with all 4 covering analysts raising estimates.
Value Fundamentals
Innophos Holdings is a Zacks #1 Rank (strong buy) stock. Its 1-year return on equity (ROE) of 42.27% easily dwarfs the industry average of 10.49%. The company has a price-to-book ratio of 1.77. It also rewards shareholders with a dividend currently yielding 2.80%.
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.
