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The global growth story is not slowing if the chemical companies are any indication. Kraton Performance Polymers, Inc. (KRA - Snapshot Report) saw sales volume rise 10% in the fourth quarter of 2010 and expects the growth story to continue in 2011. This Zacks #1 Rank (strong buy) is still cheap, trading at just 11x forward estimates.

Kraton manufactures engineered polymers and styrenic block copolymers (SBCs). These products are used across a wide range of products such as adhesives, coatings, personal care products, sealants and lubricants, footwear products, paving and roofing products.

It is a global company with customers in over 60 countries and manufacturing facilities in 5 plants in Germany, France, Brazil, Japan and Ohio.

Kraton Surprised By 7.3%

On Mar 2, Kraton reported its fourth quarter results and surprised by 3 cents a share. Earnings per share were 44 cents compared to the 41 cents consensus. The company lost 7 cents in the year ago period.

This was the 4th consecutive beat but the company only went public in the fourth quarter of 2009 so there is a limited earnings history.

Still, it's a nice track record to start out beating 4 out of 5 quarters.

Sales jumped 21% to $288 million mainly due to higher sales volume which rose 10% and price increases put into affect in response to rising raw material costs.

Revenue rose in each of the company's segments with the largest, Advanced Materials, seeing a 23% gain to $92 million. Even the Paving and Roofing segment saw growth of 31% to $64 million, boosted by increased roofing volume in Europe, of all places, and even in North America.

Price increases were enacted to offset higher monomer costs. Paving was weaker, however, especially in North America where there was a lack of funding for infrastructure projects.

For the full year, sales volume climbed 18% and revenue soared 33% to $1.2 billion versus 2009. The revenue increase was again driven by higher sales volume and higher prices, boosted by rising material costs.

Growth Expected to Continue in 2011

Kraton is bullish on 2011. Based on existing trends, it expects first quarter sales volume to be 5% to 7% higher than Q1 of 2010.

It also believes the pricing for its 3 primary feedstocks, on average, will be higher than the fourth quarter of 2010.

Zacks Consensus Estimates Jump

Given the optimistic outlook, analysts moved to raise 2011 and 2012 estimates. In the last month, 4 estimates were revised higher for 2011, pushing the Zacks Consensus up to $3.76 from $3.56 per share.

That is earnings growth of 15.4% in 2011.

2 estimates have also moved higher for 2012 in the last 30 days. Analysts expect earnings of $4.20 in 2012, which is earnings growth of 11.6%.

Still Value in the Shares

Even with shares at new 52-week highs, Kraton still has attractive valuations.

In addition to a low forward P/E, the company has a price-to-book ratio of 2.8.

It also has a stellar return on equity (ROE) of 24.5%.

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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