Stepan Company

Stepan Company (SCL) recently turned in record results for the second quarter. Earnings per share of $2.09 surpassed the previous year’s 93 cents and topped the Zacks Consensus Estimate by 130%. The company also declared a quarterly dividend of 22 cents per share, which translates into an industry-leading yield of 1.85%.

Company Description

Stepan Company manufactures specialty and intermediate chemicals used in consumer products and industrial application. The company produces surfactants, which are the key ingredients in consumer and industrial cleaning compounds.

The company explains that manufacturers of detergents, shampoos, lotions, toothpastes and cosmetics depend on surfactants to achieve the foaming and cleaning qualities of their products.

Stepan also makes lubricating ingredients and emulsifiers for spreading of agricultural products. The company produces germicidal quaternary compounds as well.

Stepan produces other specialty products, including custom-made flavors, emulsifiers and solubilizers, which are used in the food and pharmaceutical industries. The company’s other products are used by the construction and refrigeration industries.

Stepan is headquartered in Northfield, Illinois and utilizes a network of modern production facilities located in North and South America, Europe and Asia.

A Record Quarter and Strong Momentum

The company recently turned in record results for the second quarter. Earnings per share of $2.09 surpassed the previous year’s 93 cents and topped the Zacks Consensus Estimate by 130%.

Net sales fell 24% year-over-year on a drop in sales volume and lower prices, which contracted in response to falling commodity costs.

Stepan noted that its balance sheet strengthened as cash rose to $55.8 million on improved earnings and lower working capital requirements. Debt net of cash declined from $125.3 million to $65.7 million.

Stepan is a solid Growth and Income pick that has also seen strong momentum, climbing about 10% since reporting, which doubles the market’s return over that time period.

Solid Income

The company also declared a quarterly dividend of 22 cents per share, which translates into an industry-leading yield of 1.85%.

The dividend is payable on September 15 to shareholders of record on August 31.

Bullish Forecasts

Analysts polled by Zacks are calling for 2009 earnings of $4.76 per share, an impressive 72% upward revision over the past month.

For 2010, the Zacks Consensus Estimate jumped 9% from $3.30 per share to $3.60 over the past month.