Quaker Chemical Corp. (KWR) recently hit a new 52-week high at $29.88 as the company’s business continues to rebound from a challenging 2009.
Company Description
Quaker Chemical Corp. develops, produces and markets formulated chemical specialty products for various heavy industrial and manufacturing applications. The company was founded in 1918.
Lower Expenses Drove 2009
2009 was the first time Quaker saw a Y-O-Y sales decline in more than 10 years, with revenue dropping 22%, or $130 million from 2008 to $451 million. But the company still managed to show a gain in earnings, up close to 50% from 2008 to $1.47 per share on the back of lower costs of goods sold and strict expense management.
The company’s early March, Q4 results showcased Quaker’s recent momentum, containing a solid 91% earnings surprise on higher sales volumes and a massive expansion in gross margin, up 1200 basis points from last year to 36%.
Quaker has also moved to strengthen its balance sheet, paying down a quarter of its debt during the period and reducing its debt-to-capital ratio to 20% from 32% last year, helped by a $6.9 million improvement in operating cash flow.
Well Positioned for Growth
CEO Michael Barry reinforced the notion that the company effectively fought through a tough year and looks well positioned for growth on a rebounding global economy, saying that, “2009 was a challenging year given the severe decline in volumes, but we were able to exit the year in a stronger financial and competitive position.”
Estimates
The analysts share the optimism, with the current-year estimate up 44 cents in the last 3 months and 8 cents in just the last week to $1.88. The next-year estimate is up 25 cents in the last 60 days to $2.01, a respectable 6% growth projection.
Valuation and Volatility
Based on the current-year estimate, shares of KWR are trading with a forward P/E multiple of 16X, a slight premium to the S&P but a discount to its peer group. The company has a P/B multiple of 2.1X, well ahead of the S&P of 5X but a pinch richer than the industry average of 1.8X. Don’t forget about the very solid dividend yield of 3.60%.
The Chart
Shares of KWR recently hit a new 52-week high after breaking above some short-term resistance between $27 and $28. If we see any weakness this area should provide support, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service. Zacks Investment Research
