Corn Products International, Inc. - Growth & Income

With sugar prices soaring, corn sweeteners have become comparatively more attractive. That is good news for Corn Products International, Inc. (CPO), a leading corn refiner.

The company recently delivered its sixth consecutive positive earnings surprise, and management revised its guidance higher for 2010. Although the stock has soared over the last six months, valuation remains in check as analysts continue to raise their estimates.

Strong Emerging Market Growth

Corn Products International reported third quarter earnings per share came of 81 cents, beating the Zacks Consensus Estimate by a penny. It was a 16% increase over the same quarter in 2009.

Net sales increased 5% year-over-year as volume growth was strong across all regions. Asia/Africa division was the strongest, however, with top-line growth of 30%, while South America increased 14%.

The gross margin expanded from 15.8% of sales to 16.8% due in part to cost improvement from higher utilization rates and lower unit corn costs. Meanwhile, operating income increased 17%.

Raised Guidance

Following the strong quarter, management increased its guidance for 2010 to a range of $2.75 to $2.85, up from previous guidance of $2.55 to $2.75. The Zacks Consensus Estimate for 2010 is above guidance at $2.90, representing 44% growth over 2009 EPS. The 2011 estimate is $3.61, equating to 24% growth.

Earnings estimates have soared for CPO over the last several months as the company continues to beat expectations:

Corn Products International reports its results for the fourth quarter and full year 2010 before the markets open on February 17. It is a Zacks #2 Rank (Buy) stock.

Solid Dividend

Corn Products pays a dividend that yields 1.2%. Since 2000, the company has increased it at an average annual rate of 10.8%. It hasn't raised it since 2008, however.

Its payout ratio is a relatively low 20%, so expect more dividend increases in the future.

Attractive Valuation

The stock has soared more than 65% since early July. However, valuation remains in check because of rising earnings estimates. Shares trade at just 13.2x forward earnings, a discount to the industry average of 16.5x. Its price to sales ratio of 0.9 is in-line with its peers.

Corn Products International, Inc. is one of the world's leading corn refiners. The company provides various ingredients to more than 60 diverse industries including food, beverage, pharmaceutical, corrugating, animal feed, and health and wellness.

It is headquartered in Westchester, Illinois and has a market cap of $3.7 billion.

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

 
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