Corn Products International Inc. - Value

Corn Products International Inc. (CPO) continues to see a turnaround in business as volumes recovered in all regions in the second quarter. The company trades at just 12.3x forward earnings, well under the industry average of 14.5.

Corn Products is the largest producer of dextrose in the world and manufactures starches, high fructose corn syrups and glucose.

The company provides a variety of ingredients to customers in 60 industries including food, beverages, pharmaceuticals, animal feed, corrugating, paper and textiles.

Corn Products has 28 plants in 13 countries.

Corn Products Beat By 27% in the Second Quarter

On July 27, Corn Products reported its second quarter results which surprised by 16 cents on the Zacks Consensus Estimate. It was the fourth straight earnings surprise.

Earnings per share jumped 121% to 75 cents from 34 cents in the year ago period.

Sales rose 10% to $1 billion from $912 million in the second quarter of 2009. Revenue growth was boosted by higher volumes and stronger foreign currencies.

Volume recovered in all regions. Strong demand from the beverage industry in Mexico led to greater volumes in North America but sales remained flat. In South America, customers were buying in the brewing, confectionary, processed foods and packaging industries as sales jumped 26%.

Customer demand for sweetners and starches in South Korea and confectionary and textile industries in Pakistan drove volume growth in Asia/Africa which had the best sales rebound, climbing 35% over last year.

Raised Guidance for 2010

Given the volume growth, Corn Products felt confident enough in the second half of the year to raise guidance to the range of $2.55 to $2.75 from its prior guidance of $2.25 to $2.60.

It also believes it will close on its National Starch acquisition at the end of September or early October 2010.

Zacks Consensus Estimates Climb

Analysts have moved to revise their estimates higher given the bullish outlook.

Within the last week, 5 estimates have moved higher and 1 lower for the third quarter, which has pushed the Zacks Consensus up by 6 cents to 77 cents.

For the full year, the Zacks Consensus climbed to the higher end of the company's guidance range, up 18 cents to $2.71 per share.

Value Fundamentals

Corn Products still has attractive value characteristics. In addition to its low P/E, it also has a "value" price-to-book ratio of 1.4, under the industry average of 2.3.

The company's price-to-sales ratio is also within the value parameters of 0.7, under the industry average of 0.8 and under 1.0, which designates value.

Its 5-year average return on equity (ROE) is solid at 11.4%.

Corn Products also rewards shareholders with a dividend of 1.7%.

Corn Products 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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