W.R. Grace (GRA) is a Zacks #1 Rank (Strong Buy) which had made quite a run of late, but that was driven by large positive earnings surprises.
Company Description
W.R. Grace supplies catalysts and other products for petroleum refiners to make plastics, silica- based materials and other industrial applications. Uses range from goods and beverage packaging to building materials.
Three Big Earnings Reports
GRA has reported seven straight positive earnings surprises, but three reports stand out more than the others. The September 2010 quarter saw the company report earnings 15% ahead of the Zacks Consensus Estimate. The March 2011 quarter saw a 44% beat and the June 2011 quarter caught a 24% beat.
The December quarter in 2010 and 2011 both saw positive earnings surprises, but of only $0.01 or a little over 1% each time.
Estimates Move Higher
Following the recent earnings announcement, analysts have moved future expectations higher. The March 2012 quarter is now expected to come in at $0.81 per share, up from the previous estimate of $0.77. Similarly, the June 2012 quarter also saw positive earnings revisions with the estimate moving from $1.14 in December 2011 to the current level of $1.20.
GRA trades at a discount to the industry average in terms of trailing PE, but is basically in line with the industry average for forward PE. The company trades at a slight premium in terms of price to sales and a very large premium in terms of price to book. We tend to focus more on earnings as the main driver of valuations.
The Chart
Like most stocks, GRA had a challenging summer but has seen a strong run over the last 6 months. If the company continues to post positive earnings surprises expect some solid performance from GRA. W. R. Grace is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service
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