W. R. Grace & Co. (GRA) analysts are pleased with the recent earnings surprise. Estimates are moving much higher giving shares excellent growth rates, as well a attractive valuations.
This Zacks #1 Rank (Strong Buy) is also set to emerge fromn Chapter 11 later this year.
Company Description
Grace supplies catalysts and other products for petroleum refiners to make plastics, silica-based materials and other industrial applications. Uses range form good and beverage packaging to building materials.
Widespread Sales Growth
On Apr 26 Grace reported quarterly results that showed a 13% increase in sales, to $696 million, including a 16% growth in emerging regions. Thanks to excellent management the company was able to keep margins solid margins, despite a jump in input costs.
Net income for the period was up just over 4%, to $58.7 million. That breaks down to $0.78 per share, up from $0.50 a year ago. This was a 24-cent earnings surprise, as analysts were looking for just $0.54. Grace has now topped forecasts in each of the past 5 quarters.
Estimates Keep Climbing
Analysts quickly raised their projections following the quarterly surprise. The Zacks Consensus Estimate for 2011 is up 37 cents on the news and up 74 cents in the past 3 months. Next year’s average estimate rose 50 cents in the past week and 62 cents since February.
Grace earned $2.63 in 2010, which puts expected growth rates at 27% and 5%, respectively.
And a Great Value
Shares of GRA are also trading at attractive multiples. The forward P/E is just under 13 times, which is better than most of the peer group. GRA has a price to sales of 1.15, which on par with the industry average of 1.19.
Emerging from Bankruptcy
Grace has been going through Chapter 11 bankruptcy litigation for about a decade, due to asbestos-related issues. However, most analysts are expecting that to come to a close this year.
The Chart
You can see that analysts are growing more and more bullish with their earnings estimates as we emerge from the recession and the company from bankruptcy.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
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