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PH Glatfelter

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Earnings momentum for PH Glatfelter Co. (GLT - Free Report) is on the rise following its forecast-topping second-quarter 2012 results, posted on July 31. The specialty papers maker has beaten the Zacks Consensus Estimate in 8 of the last 12 quarters, including a staggering 140% positive earnings surprise most recently. This Zacks #2 Rank (Buy) stock offers a healthy dividend yield of 2.2% and is expected to deliver double-digit earnings growth in 2012 despite the fragile economic environment in Europe.

Huge Beat in 2Q

Glatfelter reported adjusted (barring one-time items) earnings of 12 cents per share in the second quarter, trouncing the Zacks Consensus Estimate by 7 cents. Results were aided by the company’s aggressive cost containment measures and benefits from share repurchases.

Revenues, however, dipped 3.3% year over year to $384.7 million as the company witnessed declines across the board. Revenues from the core Specialty Papers unit edged down 1.2% while Composite Fibers sales fell 6.7%. Moreover, sales clipped 4.5% in the Advanced Airlaid Materials unit. Unfavorable currency exchange translation and difficult economic conditions in Europe weighed on the results.

Glatfelter expects to continue benefiting from its ongoing growth initiatives. The company anticipates shipping volume for Specialty Papers to improve roughly 5% in the third quarter. For both the Composite Fibers and Advanced Airlaid Materials businesses, it expects shipping volumes to be modestly higher sequentially in the third quarter while selling prices are expected to be in tandem with the second quarter.

Earnings Estimates Moving Higher

For 2012, two of three estimates have been revised higher in the last 30 days, sending the Zacks Consensus Estimate up by a penny (or 0.8%) to $1.31 a share. This reflects estimated year over year growth of roughly 29.4%. However, there has been a solitary downward revision as well over the same period.

For 2013, one of three estimates has moved up in the last 30 days, raising the Zacks Consensus Estimate by a couple of cents (or 1.4%) to $1.50 per share. This indicates a projected year over year growth of 14.8%.

Stable Dividend

Glatfelter has been consistently paying a quarterly dividend of 9 cents per share since October 2003. The company, in June 2012, declared its most recent quarterly dividend, affirming a yield of 2.2%.

Compelling Valuation

Glatfelter trades at a discount to its peers by most metrics. It is currently trading at a forward P/E of 12.43x, a roughly 25% discount to the peer group average of 16.55x. Moreover, its trailing twelve months P/E of 14.12x is lower than the peer group average of 15.4x. The price-to-book of 1.35x is also below the peer group average of 1.40x.

Chart Reflects Growth

Glatfelter’s price performance has been reasonably healthy with the chart showing an upward trend since March 2009 with a few intermittent retracements. The consistent growth in earnings estimates have pushed the stock higher, which should draw investors’ attention.

With a series of earnings beats, healthy growth trajectory, rising earnings estimates, an attractive dividend yield, reasonable valuation and a leading market position across a number of product lines, Glatfelter is a good bet for investors seeking both growth and income.

Founded in 1864, P.H. Glatfelter Co. makes specialty papers and fiber-based engineered materials. Its offerings include security papers, book publishing papers, envelopes, converting papers, shopping bags, food and beverage paper, metallized products, composite laminates papers and feminine hygiene products. Glatfelter, which has a market cap of $692 million, markets its products directly and through wholesale paper merchants, brokers and agents in the U.S., and internationally.

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