NewMarket Corp. - Growth & Income

NewMarket Corp (NEU) carried its momentum into the third quarter and delivered a 5% positive earnings surprise on solid revenue growth.

Estimates continue to climb as the economy improves and NewMarket outperforms expectations. Valuation is cheap, too, with a PEG ratio of just 0.6.

It is a Zacks #2 Rank (Buy) stock.

Third Quarter Results

NewMarket reported third quarter earnings per share of $3.41, beating the Zacks Consensus Estimate by 5%.

Total revenue increased 12.9% over the same quarter in 2009. Gross profit as a percentage of revenue declined, however, from 34.2% to 28.8%. This contributed to a 17.3% drop in operating income.

Growth

Analysts have continued to raise their estimates over the last several months as the economy improves and NewMarket outperforms expectations.

The Zacks Consensus Estimate for 2010 is $12.09, a 9% increase over 2009 EPS. The 2011 estimate is currently $13.26, equating to 10% EPS growth. It is a Zacks #2 Rank (Buy) stock.

Shareholder Friendly

After halting its dividend for six years, NewMarket started paying it again in 2006. Since then, the company has raised it at an average annual rate of 37.0%. It currently yields 1.3%.

The company has also been spending its cash by paying down debt and buying back shares. For instance, NewMarket spent approximately $89 million buying back 925,000 shares in the first 9 months of 2010.

Attractive Valuation

Valuation remains attractive for the stock, with shares trading at just 9.5x forward earnings, a discount to the industry average of 16.1x.

It has a PEG ratio of only 0.6.

NewMarket manufactures petroleum additives through its two subsidiaries: Afton Chemical and Ethyl Corporation. It is based in Richmond, Virginia and has a market cap of $1.8 billion.

Read the October 12 article here.

Last Week's Growth & Income Zacks Rank Buy Stocks:

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Expedia, Inc. (EXPE) has quietly delivered three consecutive positive earnings surprises, prompting analysts to revise their earnings estimates higher. The company also has a strong balance sheet and trades at a PEG ratio below 1.0. Read the full article.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

 
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