The specialty chemical companies aren’t seeing any global slowdown . . . yet. Rockwood Holdings, Inc. (ROC) saw sales jump double digits in the second quarter on strong demand. This Zacks #1 Rank (strong buy) also has attractive valuations with a forward P/E of 14.
Rockwood is a global specialty chemical manufacturer with 10 different business segments including high performance ceramics, lithium-based chemicals and fine chemicals.
Additionally, it makes rubber, high purity inorganic metallic salts (which are used in the oil fields, textiles and agriculture), pigments, and titanium dioxide.
The company is also one of Europe’s biggest suppliers of flocculants for water treatment and it also makes specialty additives as well as wood protection products.
Rockwood Beat the Zacks Consensus By 23%
On July 27, Rockwood Holdings reported its second quarter results and surprised for the 8th consecutive time. Not only has it beaten the consensus during that time, it has beaten big.
Earnings per share were $1.19 compared to the consensus of just 97 cents. The company has averaged a 21% surprise over just the last 4 quarters.
Sales jumped 23% to $1 billion from $813.7 million in the year ago quarter boosted by the specialty chemical segment which saw sales rise 25% from last year.
For the first 6 months of the year, sales climbed 20.2% to $1.9 billion.
2011 Outlook Is for Demand to Remain Strong
Rockwood didn’t provide EPS guidance but the company said there was strong demand in Q2 across all of its segments and that it expected to maintain its high margins and improve EPS.
Analysts liked what they heard as the Zacks Consensus jumped to $3.99 from $3.68 per share.
That is earnings growth of 92% as the company made only $2.08 in 2010.
Analysts are also bullish on 2012 with the Zacks Consensus rising to $4.70 from $4.30 per share.
That is further earnings growth of 18%.
Rockwood Has Growth and Value
Rockwood is one of those rare companies that has both double digit growth but also is a value stock.
Shares have been on a tear off the recession lows, surging to 5-year highs before recently pulling back.
But with the earnings rising, valuations have remained reasonable.
In addition to a P/E of 14, which is under the 15x level I use to designate “value”, it also has a price-to-book ratio of 2.5.
A P/B ratio under 3.0 usually indicates value.
The company also has a solid 1-year return on equity (ROE) of 16.6%.
Rockwood would be among the first to see the global slowdown given that specialty chemicals are the building blocks of the manufacturing base. But, for now, the company sees further growth ahead and strong demand.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.
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