Myers Industries: Big Earnings Rebound Expected

• Price: $11.80
• Forward P/E: 14
• Earnings Growth: 70%
• Projected Sales Growth: 3%
• Market Cap: $418 million

Why It's Featured: Earnings should increase 70% this year.
Danger Zones: Volatile earnings history; still very small. Myers Industries MYE manufactures and distributes polymer products for the industrial, agricultural, automotive, commercial, and consumer markets primarily in North, Central, and South Americas. It operates in four groups: Material Handling, Lawn and Garden, Engineered Products, and Distribution. The Material Handling segment offers plastic reusable material handling containers, and pallets and bins, as well as metal shelving, cabinets, and racking systems primarily under the Buckhorn and Akro-Mils brand names for automotive, appliance, general industrial/manufacturing, distribution, agriculture, retail, and food processing markets. The Lawn and Garden division provides injection-molded and thermoformed pots, hanging baskets, flats and carry trays, plug trays, nursery containers, propagation sheets, and specialty pots under the Dillen, ITML, Pro Cal, Listo, Planters' Pride, and Akro-Mils Lawn & Garden brand names for the horticultural container needs of the floriculture/horticulture market. Customers include professional growers, greenhouses, nurseries, retail garden centers, mass merchandisers, and consumers. The Engineered Products segment offers engineered plastic and rubber original equipment and replacement parts, tire repair materials, and custom rubber and plastic components and materials under the Ameri-Kart, Patch Rubber, and WEK brand names. It serves the automotive, recreational vehicle and marine, construction and agriculture equipment, healthcare, and transportation markets. The Distribution group distributes tools, equipment, and supplies used for tire, wheel, and undervehicle service on passenger, heavy truck, and off-road vehicles. It offers products under the Myers Tire Supply and Myers Tire Supply International brands to independent tire dealers, mass merchandisers, commercial auto and truck fleets, tire retreaders, and general repair facilities. Myers Industries, Inc. was founded in 1933 and is headquartered in Akron, Ohio. MYE tanked in 2009, just like the rest of the market, went down to $2.80 a share when it looked the world would end. It didn't. Demand for MYE products diminished, especially in 2010 when earnings dipped to 37 cents from 59 cents in 2009. But management has been busy fixing things like efficiencies. Earnings for 2011 are expected to be 63 cents a share, up 70%. For 2012, two analysts have a consensus estimate of 86 cents (up another 36.5%). But they have very different individual estimates: one is forecasting 74 cents, the other 98 cents, in between, for the consensus is the 86 cents. History suggests a wide range is necessary to capture the earnings because volatile is a word that best describes them. Earnings per share (EPS) since 2000 went from a high of 82 cents to a low of 39 cents with plenty of stops in between. In 2000, they were 73 cents. In '01, they dipped to 47 cents. In '06 and '07, they were 82 cents. By last year, they were 37 cents. So don't expect earnings to increase in a straight line. For the third quarter, 2 analysts see 18 cents vs 11 cents last year in the third. For the fourth period, they see 32 cents compared to 20 cents last year in the final quarter, up 60%. Margins are improving at MYE. They're the biggest reason for the higher earnings. Prices went up in the first half and stuck. A better product mix which included dropping low margined items like pallets helped as well. Strong demand for reusable material-handling containers in the agricultural, industrial and automotive markets is driving the top line. Higher prices were accepted this year by customers but don't expect another round next year, at least not as robust. Two other divisions, Distribution and Engineered Products should have a solid year this year if the economy gets healthier, and should enjoy another one in 2012. The Distribution business offers a broad range of products, has better trained staff and customer service and same day shipping to boost sales. Management is also consolidating warehouses which will increase margins. Engineered Products are seeing better demand from recreational vehicle producers for custom moldings and other goods. Another bright spot: Lawn and Garden. While it saw diminished results this year due to bad weather the first six month of this year, analysts believe a rebound in orders should happen in 2012 if the weather returns to a more normal pattern. Essential Numbers:

• Price to sales ratio: .56
• Price to book: 2.05
• Operating margin: 7.9%
• Profit margin: 1.9%
• Return on equity: 6.5%
• Revenue (last 12 months): $748.53 million
• Total Cash: $2.85 million
• Cash per share: 8 cents
• Total debt: $79.93 million
• Total debt to equity: 39.37%
• Current ratio: 2.07
• Book value per share: $5.89
• Beta: 2.49
• 52-wk change: 28%
• Total share outstanding: 34.46 million
• Float: 31.62 million
• Insiders own: 28.18%
• Institutions own: 67.7%
• Dividend: 28 cents
• Yield: 2.3%

Aggressive investors looking for a turnaround story need look no further. MYE is cutting costs, raising prices, and seeing ever increasing demand for some of its divisions. This year and next should show solid earnings growth. But remember the volatility of those earnings. Some years, they drop dramatically only to see the next year rebound significantly. This one's not for the timid. (For more aggressive stocks, see our Aggressive Investor columns at www.theonlineinvestor.com) - Company Web site: www.myersindustries.com Ted Allrich
October 26, 2011 Ted is the Chairman of the Board of B of I Holding and Bank of Internet USA. He is also the founder of The Online Investor (www.theonlineinvestor.com) which has a Free Newsletter for investors.