Arch Chemicals Inc. - Value

Arch Chemicals Inc. (ARJ) recently raised full year guidance after it saw strong demand across all its business segments as the global recovery continued.

Arch Chemicals produces chemicals that destroy and control the growth of harmful microbes. It has two segments: Biocides Products and Performance Products. It's largest segment is the Biocides.

The company focuses on water treatment including sanitizers and chemicals that destroy microbes in pools and spas, drinking water and water used in industrial and commercial uses such as bottle cleaning operations.

Its personal care products are found in cosmetics and its zinc Omadine is a popular antidandruff shampoo agent.

Arch Chemicals has manufacturing and support facilities worldwide, including in Asia, Europe, Australia, Africa and North and South America.

Arch Chemicals Surprised By 8.8% in the Second Quarter

Arch Chemicals reported second quarter results on Aug 4 which beat the Zacks Consensus by 14 cents. Earnings per share were $1.73 compared to the consensus of $1.59. The company made $1.23 in the year ago period.

Sales jumped 17.1% to $441.4 million from $377 million in the second quarter of 2009. The quarter was boosted by sales of HTH water products, personal care and industrial biocides, especially in antidandruff shampoo and building products.

The company's wood protection business has been hit hard by the construction downturn but it saw better top-line and bottom-line results as demand increased and raw material costs fell. Sales rose 8.9% in the segment.

The entire Biocides Product segment, its largest, saw sales rise 16%.

Full Year Outlook Raised

Arch is bullish going into the second half of the year as it saw strong global demand for biocides products in the first half and sees that demand continuing.

Sales are now expected to rise between 9% and 11%.

Earnings per share are now forecast in the range of $2.25 to $2.40, up from its prior guidance of $1.90 to $2.10 per share.

Zacks Consensus Estimates Climb

As you would expect after a company raises its guidance, the analysts all revised their estimates higher for 2010.

The 2010 Zacks Consensus jumped 22 cents to $2.39 in the last 60 days. That is earnings per share growth of 25%.

1 estimate was also revised higher for 2011 in just the last week, pushing the 2011 Zacks Consensus up 2 cents to $2.58 per share.

Value Fundamentals

Arch Chemicals has several value characteristics. Its forward P/E is just 13.5, which is within the value parameters of under 15 and just under the P/E of the S&P 500, at 13.7.

It also has a price-to-book ratio of 2.0, which is, again, within the value parameters of under 3.0.

Arch has a solid return on equity (ROE) of 15.8%, higher than the industry average of 13.7%.

Arch Chemicals is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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