Specialty chemicals company NewMarket Corp. (NEU) posted third quarter earnings that more than tripled from last year, thanks to strong gross margin expansion.
The company makes chemical additives that enhance the performance of petroleum products to make fuels burn cleaner or help engines run better.
Net income for the quarter rose to $56.7 million, or $3.72 per share from year-ago $16.5 million, or $1.07 per share. Excluding a $2.4 million or 16 cents per share charge for an unrealized loss on an interest rate swap agreement, the company earned $59.1 million, or $3.88 per share. Analysts were looking for earnings of $2.15 a share. In the last four quarters, the company has outperformed estimates by an average 55%.
Total sales declined 5% to $417.8 million from $440.6 million last year, but came ahead of the consensus estimate of $396.5 million. Cost of goods sold or COGS decreased more sharply by 25% to $274.9 million from $367 million in the previous year.
Sales of petroleum additives declined to $413.7 million from $437.2 million last year, but operating profit for the same improved to $96.3 million from $28.1 million last year. Shipments of Petroleum additives fell 3% from last year, but improved 14% sequentially.
The company noted that going forward, the demand for its petroleum additives appears to have returned to levels more consistent with those seen before the world economic slowdown in late 2008, adding that the construction of the petroleum additives supply facility in Singapore is on schedule with the majority of the expenditure in 2009 and production expected during the first half of 2010.
Analysts are very bullish about the company's earnings prospects in the fourth quarter and full year. In the last 90 days, earnings per share estimates have been boosted by 39 cents to $1.65 from $1.26 for the fourth quarter and by $2.39 to $8.64 from $6.25 for the full year.
The stock has surged 171% in the year-to-date period, and trades at 11.2 times the company's FY09 estimates, at par with peer Lubrizol Corp. (LZ).
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