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Arch Chemicals Inc.

by Tracey Ryniec

February 11, 2011 | Comments : 0 Recommended this article: (0)

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Arch Chemicals Inc. (ARJ) blew by the Zacks Consensus Estimate by 1900% in the fourth quarter as the company found new markets as the economy recovered. Arch is a value stock with a forward P/E of just 12.6.

Arch Chemicals, which has global operations, produces chemicals that destroy and control the growth of harmful microbes. It has two segments: Biocides Products and Performance Products. It's largest segment is the Biocides.

The company focuses on water treatment including sanitizers and chemicals that destroy microbes in pools and spas, drinking water and water used in industrial and commercial uses such as bottle cleaning operations.

Arch Had Record Earnings in 2010

On Feb 3, Arch reported fourth quarter results and surprised on the Zacks Consensus Estimate for the 6th quarter in a row.

Earnings per share were 20 cents compared to the consensus of just 1 cent. The company earned 12 cents in the year ago quarter.

Sales rose to $311.7 million from $293.4 million last year. The gains were due to higher sales from innovative products and emerging markets. Its largest segment, Biocides, saw sales rise 5.4% to $263.9 million.

Outlook for 2011

2011 is shaping up to be another strong year. Arch projects sales to rise between 5% to 7% due to strong growth from the Biocides business.

Since the earnings report, analysts have been raising estimates for 2011 and 2012.

The 2011 Zacks Consensus Estimate has jumped to $2.84 from $2.60 in the last week. That is earnings growth of 6.9%.

Analysts expect another 6.1% earnings growth in 2012 with the consensus moving to $3.02 from $2.77 in the last 7 days.

Attractive Valuations

In addition to the low P/E ratio, Arch has a price-to-book of 2 which is well within the value parameters.

It also has a price-to-sales ratio of just 0.7.

Arch Chemicals is a Zacks #1 Rank (strong buy) stock.

Read the Sep 9, 2010 article.

This Week's Value Zacks Rank Buy Stocks

Specialty chemical companies are bullish about 2011 as global demand continues to recover. Cabot Corporation (CBT) is growing its emerging markets business to tap into that demand. Cabot is a value stock, trading with a forward P/E of 14. Read the full article.

The global technology and industrial recovery has been strong the last few quarters. Newport Corporation (NEWP) recently reported record 4th quarter sales as all of its end markets saw strong demand. Even with shares surging, the stock is cheap, trading at just 12.9x forward estimates. Read the full article.

One thing is clear from this earnings season. Those companies with a global reach, especially in chemicals and industrial materials, have fully rebounded from pre-recession levels. PolyOne Corporation (POL) just reported a record 2010 as earnings rose 252% and sales jumped 27%. Read the full article.

ScanSource Inc. (SCSC) blew by the Zacks Consensus Estimate when it reported fiscal second quarter results on Jan 27 in yet another example that the global recovery is on the fast track. This Zacks #1 Rank (strong buy) is trading at just 14.3x forward estimates. Read the full article.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

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