CARBO Ceramics Inc. - Momentum

Strong momentum continues for CARBO Ceramics Inc. (CRR) as shares hit a new all-time high after the company posted record third-quarter earnings on Oct 28 that surprised on the Zacks Consensus Estimate by 13%. It was the third beat in a row for this Zacks #2 Rank (buy) as demand remains hot from the oil industry oil for CARBO's products.

CARBO is the world's largest supplier of ceramic proppant for fracturing oil and gas wells. With natural gas prices in the dumps, its customers have been moving towards oily, liquid-rich plays especially in the major shale areas in North America.

Demand Is Strong

CARBO's plants were operating at high utilization rates in the third quarter to keep up with demand.

Sales volume rose 12% to 332 million pounds. North American proppant sales volume climbed 16% while international sales fell 6% compared to last year.

Revenue also jumped 29% to $118.5 million from the third quarter of 2009.

More capacity is on the way as it expects to increase global production by 40%, or 500 million pounds, in the next 12 months.

It will start with a third 250 million pound production line at its Toomsboro, GA facility this month. A fourth 250 million pound line is expected to come on line later.

Bullish Outlook Looking Forward

CARBO did not provide any forward EPS guidance in its third quarter report. However, you couldn't help but notice the company's optimism about the near term future.

It does not see demand slowing for its products, outside of normal seasonality sales patterns, especially around the holidays.

The analysts have been adjusting earnings after CARBO's 10 cent beat. In the last week, 2 estimates have moved higher for 2010 pushing the Zacks Consensus up by 2 cents to $3.23 per share.

This is earnings growth of 42.1% in 2010.

The double digit growth is expected to continue into 2011 with 1 estimate moving higher in the last week for the full year. The 2011 Zacks Consensus is up a penny to $3.85 per share in that time which is earnings growth of 19.4%.

Valuations In Line With Peers

Even as shares soar, CARBO is still trading at 26.5x forward estimates. While that is not cheap compared to the S&P 500 it is pretty much in line with its peers which are trading at 25.2x.

The company has a solid return on equity (ROE) of 14.7% whereas its peers are lagging at just 0.9%.

CARBO is a Zacks #2 Rank (buy) stock.

Shares have gotten a boost off the earnings report and momentum is still to the upside despite trading at all time highs. Check out the impressive 2-year chart.

Read the Sep 7 article.

Update to Previous Momentum Zacks Rank Buy Stocks

Under Armour, Inc. (UA) recently hit a new multi-year high after posting a solid 13% Q3 earnings surprise in late October. Estimates have since jumped higher, providing this Zacks #1 rank stock with a nice dose of momentum. Read the full article.

Penn National Gaming, Inc. (PENN) just hit a new 52-week high on the heels of a solid 12%, Q3 earnings surprise. With estimates on the rise and a bullish growth projection, this Zacks #1 rank stock offers a hearty helping of momentum. Read the full article.

Complete Production Services, Inc. (CPX) continues to pressure its multi-year high at $25.97 after reporting solid Q3 results that included a 35% earnings surprise. With an average earnings surprise of 178% over the last four quarters and a bullish growth projection, this Zacks #1 rank stock is gushing momentum. Read the full article.

Amerigroup Corp. (AGP) recently jumped to a new multi-year high after reporting an awesome Q3 earnings surprise that more than doubled the Zacks Consensus Estimate. Estimates have since followed suit, giving this Zacks #1 rank stock a big dose of upward momentum. Read the full article.

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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