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Value

The specialty chemical companies are thanking their lucky stars that North American manufacturing remains robust. Quaker Chemical Corporation (KWR - Snapshot Report) still managed a first quarter sales gain of 11% despite a slowdown in China and Europe. This Zacks #1 Rank (Strong Buy) is a value stock with a forward P/E of 11.2.

Quaker's chemical business is a barometer of the global economy because while it is headquartered in Pennsylvania, it has a presence in every major manufacturing country in the world. It also has regional headquarters in the growth powerhouses of Brazil and China.

The company produces process chemicals and specialty chemicals for some of the key building block industries such as primary metals and metalworking.

Quaker Beat By 33.8% In The First Quarter

On Apr 30, Quaker reported its first quarter results and easily surprised on the Zacks Consensus Estimate by 23 cents. Earnings per share were 91 cents compared to the consensus of just 68 cents. It was the third beat in the last 4 quarters.

Sales rose 11% to $177.6 million from $159.9 million a year ago. The ongoing recovery in North American manufacturing helped offset the sluggishness in Europe and China.

Product volumes also climbed by about 5%, including acquisitions. Higher selling prices and mix also boosted revenue by 8%. The price increases were implemented in 2011 to help offset rising raw material costs.

Uncertainty For 2012

While Quaker didn't warn about 2012 in April, it didn't exactly sound completely bullish either.

Higher raw material costs are biting again. It was beginning to institute price increases but that would take several months. Meanwhile, margins were expected to be impacted.

Additionally, the global economy remains mixed. Many regions were expected to remain soft.

The company didn't exactly get out the pompoms and cheer for 2012.

The 2012 Zacks Consensus Estimate Rises

Yet despite all the uncertainty, four estimates were revised higher for the full year in the last month. The 2012 Zacks Consensus rose about 0.1% to $3.52 from $3.32 in the prior 30 days.

That is continued earnings growth of 8.4%.

Valuations Still Look Attractive

Despite rising earnings estimates, Quaker remains a value stock.

In addition to a P/E of just 11.2, the company has a price-to-book ratio of 1.9. That is under the industry average of 2.2.

Quaker also has a stellar price-to-sales ratio of 0.7. The S&P 500 averages, by contrast, a P/S of 2.1. A P/S ratio under 1.0 usually indicates value.

The company has other solid fundamentals including a 1-year return on equity (ROE) of 17.2%. That is also under the industry average of 14.3%.

Shareholders are also rewarded with a solid dividend, currently yielding 2.4%.

Quaker is an interesting global play on the manufacturing sector. It's definitely one to watch for signs of a slowdown, or recovery, in key markets.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec.

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