Piper Jaffray Gives PolyOne Earnings Preview

Piper Jaffray expects PolyOne's POL 4Q10 earnings release Thursday to meet expectations despite some seasonal weakness and potential raw material inflation. 4Q09 included full effects of incremental distribution contracts signed in earlier in CY09 making for stiffer comps, but its expects its 11% revenue growth to remain a relatively easy bogey for PolyOne in 4Q based on continued volume expansion and pricing increases related to raw material across platforms. PolyOne has significantly beat Street EPS for six consecutive quarters. Although it believes upside to estimates could be less than in the past in 4Q, Piper continues to be buyers, especially on weakness, and expect continued outperformance in CY11. Consensus estimates align closely with implied guidance after 3Q earnings, making an earnings miss somewhat unlikely in Piper'sview. It is forecasting 15% y/y growth within PolyOne's distribution segment, and expect higher y/y prices will support that figure even if y/y volume is a bit light. Its 10% y/y revenue growth for Specialty also appears conservative, while PPS revenue upside to its 9% y/y growth will likely prove challenging. Risks include a slowdown in the global economy that reduces plastics demand, and shifts in raw material pricing that could adversely affect results of operations. Piper Jaffray has an $18 PT and Overweight rating on POL POL closed Monday at $13.15