OM Group, Inc. (OMG) has seen demand return in some of its key chemical markets, especially in technology. The company has surprised on estimates 2 out of the last 4 quarters. OM Group trades with a forward P/E of 14.4.
Company Description
OM Group manufactures specialty chemicals and advanced materials for industrial processes. The company has more than 4,000 customers worldwide in over 50 industries. OM Group specializes in cobalt-based specialty chemicals and is a leading supplier of nickel-based specialty chemicals.
OM Group has manufacturing facilities in the Americas, Europe, Asia and Africa.
2010 Zacks Consensus Estimates Jump
OM Group is expected to report fourth quarter results on Feb 25. But analysts have been looking beyond 2009 and are far more optimistic about 2010.
The 2009 Zacks Consensus has risen modestly, by 13 cents, in the last 60 days to 98 cents.
But the 2010 Zacks Consensus has climbed 25.4% to $2.47 from $1.97 per share in just the last 7 days as 2 estimates moved higher. This would be earnings growth of 151.53%.
OM Group Surprised on the Third Quarter by 56.76%
On Nov 5, OM Group reported third quarter results which beat the Zacks Consensus by 21 cents per share. Earnings per share were 58 cents compared to analysts’ estimates of 37 cents.
Sales, however, fell 48% compared to a year ago due to lower selling prices on cobalt-containing products and as volumes fell due to the global recession.
However, the company saw a 16% sequential increase in sales as demand picked up in some areas, especially technology, including batteries, semiconductors, printed circuit boards and memory disks. But other areas remain weak like those associated with automotive, construction and industrial production.
OM Group remained cautious about the outlook for the next few quarters as it awaited more demand stability and pricing power. This cautious outlook clashes with the bullish optimism of the analysts for 2010 and beyond. Analysts project 10% earnings growth over the next 5 years.
Which will be right?
Value Fundamentals
OM Group is a Zacks #1 Rank (strong buy) stock. It is trading with a price-to-book ratio of just 0.94.
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.
