Lubrizol Corporation

Lubrizol Corporation (LZ) is using cost cutting to weather the storm as additive demand dropped in the first quarter. Even with tough economic conditions, the company raised its 2009 guidance. LZ has surprised on estimates 2 out of the last 4 quarters by an average of 2.96%. LZ has a PEG ratio of 0.83.

Company Description

Lubrizol manufactures specialty chemical additives for the transportation, industrial and consumer markets. The company operates facilities in 19 countries and has customers worldwide.

Its products include lubricant additives for engines, fuel additives for gasoline and diesel fuel, and specialty resins and additives for the plastics and performance coatings industries.

Lubrizol Met Estimates in the First Quarter

On Apr 30, Lubrizol announced first quarter results which met Wall Street estimates of $1.06 per share.

Revenues fell 18% to $1.01 billion from $1.23 billion in the year ago quarter as volumes fell and there was an unfavorable currency exchange. However, the company saw improvement in pricing and product mix. All geographic regions saw volume declines in additives due to economic weakness. Customers continued to destock inventory.

Cost cutting helped the bottom line in the quarter.

"We knew 2009 was going to be a challenging year, so I am very pleased with the results that both segments delivered this quarter," said CEO James Hambrick.

"Additives performed very well, particularly given the comparison to their strong results in the first quarter of 2008. Advanced Materials demonstrated significant improvement sequentially and posted solid operating income considering the state of some of their end-use markets," he added.

2009 Guidance Raised

Despite the rocky first quarter, the company is optimistic about the full year. It raised its previous guidance which had been issued on Feb 5 to an adjusted earnings per share of $3.95 to $4.35, which is higher than 2008 adjusted EPS of $4.09.

Consensus Estimates Jump

Covering analysts are scrambling to adjust estimates given the company's first quarter results. In the last 7 days, second-quarter estimates jumped 2 cents to $1.12.

2009 full-year consensus estimates climbed 9.6% to $4.22 from $3.85 per share to come inline with the company's forecast.

Value Fundamentals

Lubrizol is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 9.87 and a price-to-book of 1.82. The company also has a solid 5-year return on equity (ROE) of 13.49%. Additionally, it pays a dividend, with a current yield of 2.80%.

Read the full analyst report on LZ