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Momentum

Schweitzer-Maudit International, Inc. has held up well in the weak market, recently hitting a new six-month high while the rest of the market was under pressure. With a Q2 earnings surprise of19% and a bullish growth projection, this Zacks #1 Rank stock is a unique play on momentum in a tough market.

Company Description

Schweitzer Maudit International, Inc. manufactures and sells paper and reconstituted tobacco products to the tobacco industry and other specialized applications. The company was founded in 1995 and has a market cap of $938 million.

With investors getting nervous about slower economic growth or a possible contraction, defensive stocks and conservative segments of the market have fallen in favor. That and strong Q2 results from early August lifted SWM to a fresh multi-year high.

Second-Quarter Results

Revenue for the period was up 13% from last year to $206 million. Earnings also came in strong at $1.21, 19% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 6% over the last four quarters.

The company was also busy returning value to its shareholders, buying back $75 million in common stock during the quarter.

Estimates

We saw some pretty solid movement in estimates off the good quarter, with the current year adding 30 cents to $5.45 while the next-year estimate gained 42 cents to $6.89, a bullish 26% growth projection.

Valuation

But in spite of its resilience, SWM has serious value trading with a PEG ratio of .42, well below the traditional benchmark of 1 for value.

12-Month Chart

On the chart, SWM has held up well in the weak market, recently jumping into a new six-month high. Look for support from the trend line on any weakness. Take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Momentum Trader Service.

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