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Albemarle Corp (ALB - Snapshot Report) continued its strong momentum into the third quarter. The specialty chemical company delivered earnings per share of $1.02, crushing the Zacks Consensus Estimate by 21%. It was the company's sixth consecutive positive earnings surprise.

Management is upbeat about business, and analysts have unanimously revised their estimates for 2010 and 2011 higher, prompting an upgrade to a Zacks #1 Rank (Strong Buy) stock.

Despite more than a 30% run up in the share price since early September, shares remains reasonably valued.

Excellent Third Quarter

Albemarle reported its results for the third quarter on October 21.

It did not disappoint.

The company reported earnings per share of $1.02, crushing the Zacks Consensus Estimate by 18 cents. It was a 79% increase over the same quarter in 2009.

Net sales increased a stellar 13.5% over the same period as the company saw volume gains in each business segment due to an improved global economy. The Polymer Solutions division saw sales jump 18%, while sales in the Catalysts segment increased 14%. The Fine Chemistry division saw a 7% gain.

Meanwhile, the gross margin improved substantially, from 26.0% to 33.6%, due to increases in pricing and a favorable product mix. Operating profit nearly doubled year-over-year.

Outlook

Though they did not give specific guidance, management stated in its press release that it "remain[s] optimistic toward achieving outstanding results for the year."

Analysts share this enthusiasm and have been revising their estimates much higher. Check out the slope of 2010 and 2011 consensus estimates in the Price & Consensus chart:

ALB: Albemarle Corp

The Zacks Consensus Estimate for 2010 is $3.51, corresponding to 88% EPS growth over 2009. The 2011 estimate is currently $3.89, representing 11% annual EPS growth.

Fundamentals

Shares trade at 14.6x forward earnings, a slight discount to the industry average of 15.1x. Its PEG ratio is a very reasonable 1.2.

Albemarle's return on equity is an impressive 23.3%, well above the industry average of 5.9%. It has a divined yield of 1.1%, slightly higher than the peer group average of 0.9%.

Read the October 7 article here.

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Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

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