Value Stock: Lubrizol (LZ)

Lubrizol Corporation (LZ) is on tap to report second quarter results before the market opens on July 29 which should provide another window into the strength of the global recovery.

Lubrizol manufactures specialty chemicals, including lubricant additives for engine oils, industrial lubricants and fuel additives for gasoline and diesel fuel.

Its earnings have surged over the prior year as the industrial and manufacturing sectors have rebounded.

Bigger Share Repurchase

Lubrizol has been repurchasing shares for awhile but announced on June 29 that it was stepping up its program with another authorization to repurchase 7.2 million shares, or about 10% of the outstanding shares, over the next 18 to 24 months.

Under the current program, the company had repurchased 1.575 million shares for $125.5 million in the first six months of 2010.

Surprised Last Two Quarters

Lubrizol’s earnings surprise history is a bit misleading as it has only beaten 2 out of the last 4 quarters.

But previously, the company was issuing preliminary results ahead of the earnings announcement which gave analysts time to raise estimates to be inline with the results which meant that the earnings history shows Lubrizol just meeting estimates, when, in fact, it was surprising.

For the last two quarters, the company has not issued preliminary results which has resulted in two beats averaging 15.5%.

The Zacks Consensus Estimate for the second quarter is $2.38, up a penny in the last 30 days as 1 estimate moved higher in that time. Lubrizol made $2.02 in the second quarter of 2002.

Analysts still see growth, expecting earnings to jump 15.4% in 2010. 2011 is more of a question as, currently, EPS growth is tapped only at 2%.

Value Fundamentals

Lubrizol is still a cheap stock. It trades with a forward P/E of 10.4, well under the industry average of 13.8. Its price-to-book ratio of 2.8 is also under the industry average of 3.2.

The company has an outstanding return on equity of 30.2% whereas the industry averages just 18.2%.

Lubrizol is now a Zacks #2 Rank (buy) stock.

Read the May 5, 2010 article.

Update to Previous Value Zacks Rank Buy Stocks

PPG Industries (PPG) defied the bearish camp by posting second quarter sales recently which jumped 11%. PPG is trading with a forward P/E of 14.1. Read the full article.

MasTec Inc. (MTZ) has beat four quarters in a row by an average of 11.9%. Will it surprise again when it reports its second quarter on July 26? Read the full article.

JoS. A. Bank (JOSB) has been bucking the convention that retail, especially clothing, is dead in the water as the company has been aggressively growing during, and now after, the recession. JOSB has a return on equity (ROE) of 22.1%, well above the industry average of 13.1%. Read the full article.

CSX Corporation (CSX) recently reported another solid quarter as the recovery continues on the rails. CSX trades at 13x forward earnings, well under its peers which trade at 16x. Read the full article.

LUBRIZOL CORP (LZ): Free Stock Analysis Report
Zacks Investment Research

About Tracey Ryniec 60 Articles

Affiliation: Zacks Investment Research

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.

Visit: Zacks Investment Research

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