To a significant degree, the national infrastructure is dependent on the lubrication properties of various hydrocarbon substances. A leader in the art of enhancing those properties is headquartered in Wickliffe, Ohio.
Lubrizol Corporation (NYSE: LZ) is a specialty chemical company, operating through two units. The Additives segment offers a range of substances that enhance the performance of engine oils, fuels and oilfield chemicals. It also supplies viscosity improvers and additives for paints, inks and greases. The company's Advanced Materials segment offers a diverse portfolio of performance chemicals used in personal care products, pharmaceuticals, coating emulsions and specialty plastics. A key competitor is Chevron Corporation (NYSE: CVX) subsidiary Chevron Oronite.
The firm pleased investors last week, when it issued upside guidance for Q1. Management said it expected EPS of 98 cents, twenty-two cents above the average Street estimate. Officials noted that shipment volumes in the quarter were higher than expected and reflected a return to normal order patterns. Jefferies and Deutsche Securities subsequently reiterated their "buy" ratings on the stock and boosted their price targets to $65.
The stock popped above 30-day/50-day moving average support on the news and entered the initial stage of a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with four "buys", three "holds" and one "sell". The LZ P/E ratio (22.10), Price to Sales ratio (1.00), Price to Book ratio (2.34), Price to Cash Flow ratio (11.70) and Price to Free Cash Flow ratio (30.31) compare favorably with industry, sector and S&P 500 averages.
Institutions own about 82% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $38.03 and $58.99. A stop-loss of $50.75 looks good here. Note that the firm is expected to report Q1 results on April 27th, before the open.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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