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Albemarle Corp (ALB - Snapshot Report) recently reported second quarter earnings of 89 cents, beating the Zacks Consensus Estimate by 17%. Management is upbeat about the remainder of the year, and analysts have been pushing the 2010 estimate higher.

Albemarle manufactures specialty chemicals in three segments:

Polymer Solutions (41.5% of sales)
Catalysts (35.4%)
Fine Chemistry (23.1%)

The company is based in Baton Rouge, Louisiana and has a market cap of $4.4 billion.

Second Quarter Earnings Up 117%

Albemarle reported earnings per share of 89 cents, an increase of 117% over the same quarter in 2009.

Net sales grew 33% over the same period. Its Polymer Solutions and Fine Chemistry divisions both saw sales increase 36%. The Catalysts division, Albermarle's most profitable, grew 28%.

The company saw solid top-line growth, but its margins also expanded significantly. The gross margin improved from 24.7% to 31.8% in the period. Meanwhile, the operating margin improved from 7.0% to 18.0%, helping to drive earnings substantially higher.

Outlook

Management stated in its most recent earnings release that its outlook for the year remains positive and that most signs point to a strong third quarter with a typical seasonal contraction in the fourth quarter.

The Zacks Consensus Estimate for 2010 is $3.22, corresponding to 73% growth over 2009 EPS. The current 2011 estimate is 11% higher, at $3.57.

Fundamentals

Albemarle trades at 14.9x forward earnings, a slight premium to the peer group average of 14.3x. Its price to book ratio of 3.5 is also higher than the industry average of 2.1.

Albemarle has superior profitability that justifies its slightly higher valuation. Return on equity is a solid 20.9%, and its net profit margin of 11.6% trumps the industry average of 5.2%.

The stock offers a dividend yield 1.2%, in-line with the industry average. It is a Zacks #2 Rank (Buy) stock.

The Chart

Albemarle is trading near its 52-week high of $48.28. Shares are up about 38% in the last 12 months.

ALB: Albemarle Corp

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