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Value

The specialty chemical companies have pricing power. Kraton Performance Polymers, Inc. (KRA - Snapshot Report) saw revenue surge 26% in the first quarter as both prices and volumes rose. This Zacks #1 Rank (strong buy) is cheap with a forward P/E of 9.

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 22.5% in Q1

On May 4, Kraton reported first quarter results which beat the Zacks Consensus Estimate by 18 cents per share. Earnings per share were 98 cents compared to the 80 cent consensus.

Sales rose to $345 million from $272 million in the first quarter of 2010. The sales surge was mainly due to higher sales volumes and price increases in response to rising raw material costs.

Volume rose 12% to 81 kilotons compared to a year ago.

"The trend of higher prices for many of our key raw materials continued throughout the first quarter, and in response we announced a number of additional price increases, many of which have been implemented already in the second quarter 2011," said Kevin M. Fogarty, CEO.

Outlook for the Second Quarter

The price increases continued in the second quarter. With regard to volume, customers pulled volume forward into the first quarter, particularly in Paving and Roofing segment.

It still anticipates its second quarter volume will be between 84 and 87 kilotons, within the range of its historical volume from the first to the second quarter.

Zacks Consensus Estimates Rise

With the big first quarter beat, analysts moved to raise full year estimates.

The 2011 Zacks Consensus Estimate rose 6 cents to $4.04 in the last 30 days. 3 estimates rose and 1 fell in that time.

This is earnings growth of 23.8%.

The Zacks Consensus also jumped for 2012 to $4.35 from $4.27 per share for another 7.8% earnings growth.

Lots of Value

Shares have recently pulled back, but earnings estimates have gone up, making Kraton even cheaper using the price-to-earnings ratio.

In addition to a P/E under 10, Kraton also has a price-to-book ratio of 2.5 which is under the 3.0 cut-off used for "value" stocks.

The company also has a price-to-sales (P/S) ratio of 0.9. A P/S ratio under 1.0 usually indicates value.

Additionally, Kraton still has a stellar 1-year return on equity (ROE) of 26.6%.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.

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