LSB Industries, Inc (LXU) has everything going its way. Shares are surging, but thanks to very optimistic analysts, the valuations are still great.
This Zacks #1 Rank (Strong Buy) should double its bottom line by the end of the year and there is plenty of upside beyond that.
Company Description
LSB Industries is a manufacturing, marketing and engineering company. Its areas of focus are commercial and residential climate control products, geothermal and water source heat pumps, hydraulic fan coils. The company also makes chemicals for industrial, mining and agriculture markets.
Sales Climb 49%
On Mar 3 LSB Industries reported fourth-quarter results that showed a 49% jump in sales, to $172 million. Operating income grew hand over fist, from $38,000 to $18.0 million.
Earnings per shares for the period came in at $0.79, easily topping the Zacks consensus Estimate of $0.27. This was LSB Industries’ second surprise in the past 3 quarters.
Chemical sales were on fire, and have been all year, thanks to surging agriculture prices. The company also said it was able to recoup raw material costs through its customers with contractual obligations. LSB Industries expects demand in the chemicals business to grow throughout 2011 through the ongoing industrial recovery.
Estimates Surge Higher
After 4 upward estimate revisions immediately following the earnings news, the Zacks Consensus Estimates for 2011 jumped from $2.13 to $2.72. Next year’s forecasts are now averaging $3.17, up from $2.66.
Given the $1.33 LSB Industries earned in 2010, the expected growth rates stand at 105% and 16%.
Valuations
Even though shares have been surging for months now, the rising estimates have kept the stock priced at a discount. The forward is about 13 times 2011 estimates and the PEG ratio is just 0.9 times.
Great Earnings Trend
Below is a 5-year chart for LXU. Those multi-colored lines that are on the chart each represent one year’s consensus estimate. LSB Industries has a fantastically bullish earnings trend as you can see that red line heading off the chart.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
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