OMNOVA Solutions Inc. (OMN) announced better-than-expected fiscal second-quarter earnings late last month, leading to a sharp gain in earnings estimates for both this year and next over the past 30 days.
This specialty chemicals company has made the Zacks #1 Rank Top Performers List for Monday with a gain of approximately 4%. Volume is light at 347,000 shares, compared to the daily average of more than 865,000.
OMN is an innovator of emulsion polymers, specialty chemicals, and decorative and functional surfaces for a variety of commercial, industrial and residential end uses. It had 2008 sales of $869 million.
Sharp Gain in Estimates
There are currently 4 analysts covering OMN for this fiscal year, ending November 2009, and they have all revised their profit expectations higher in the past month. As a result, the consensus moved nearly 26% to 34 cents per share from 27 cents.
Estimates for next fiscal year, ending November 2010, are up 17.5% in that timeframe as 2 of 3 covering analysts raised expectations. The consensus now stands at 47 cents per share for that fiscal year, suggesting that profit could grow nearly 40% from this fiscal year.
A 50% Surprise in Fiscal Q2
OMN said that its fiscal second-quarter performance reflects broad-based cost reductions, structurally improved pricing, the introduction of innovative new products and lower raw material costs.
Earnings per share in the quarter advanced sharply from the previous year, moving to a profit of 12 cents from a loss of 7 cents. That result was also 50% better than Wall Street’s expectation of 8 cents per share.
This was the second straight quarter in which OMN easily surpassed the consensus. It has now surprised in 3 out of the last 4 quarters.
However, conditions were still very challenging during the quarter, as evidenced by a nearly 27% decline in net sales to $161.3 million. This decline was attributed to lower selling prices and weak market demand.
Looking forward, OMN, which is the only company from the chemicals – specialty industry on today’s 222-stock Zacks #1 Rank List, expects the second half to be profitable and cash flow positive.
