Value Stock: Cytec Industries (CYT)

Cytec Industries Inc. (CYT) just reported record second quarter earnings as sales of building block chemicals soared 89%.

Cytec Industries manufactures specialty chemicals in three areas: building block materials, engineered materials and specialty chemicals.

It has manufacturing facilities and offices in all the major global markets including North America, Asia, Latin America and Europe. Its products are found in various end user markets including aerospace, adhesives, automotive and industrial coatings, inks, mining and plastics.

Cytec Saw Record Earnings in the Second Quarter

On July 20, Cytec reported its second quarter results and saw record earnings per share as the economy improved. It was the best quarter for the company since the second quarter of 2008.

The record earnings were generated with 13% less sales than in Q2 of 2008 as cost cutting in 2009, the pruning of low margin products and improved product mix increased the bottom line.

The company easily blew by the consensus estimate by 96% as earnings per share were $1.31 compared to the Zacks Consensus of 67 cents. The company lost 1 cent per share in the year ago quarter.

All segments saw sales increases in the quarter as net sales jumped by 28% to $874 million from $685 million in the year ago period.

For instance, in the Coating Resins group, selling volumes climbed by 27% over the year ago quarter with strong demand continuing in all of the large industrial coatings markets in all regions. Selling prices increased by 2%.

One of the better performing segments was the Building Block Chemicals division which saw sales rise 89% to $172 million on the back of an increase of 75% in selling prices.

This was driven by significantly higher propylene costs which drove up pricing for acrylonitrile. Volumes rose 14% due to higher melamine demand.

2010 Guidance Raised

Given the excellent second quarter results, Cytec raised its revenue guidance range for the year to $3.2 to $3.4 billion from $2.7 to $3.0 billion. Earnings per share are now expected between $3.20 and $3.50 up from the prior guidance of $1.90 to $2.40.

“Although we are still operating in a dynamic economic environment, the improved global demand we have experienced across our chemical businesses in the first half of 2010 leads us to a positive outlook for the remainder of 2010,” said Shane Fleming, President and CEO.

Zacks Consensus Estimates Soar

Given the big second quarter beat and the bullish outlook, it’s not surprising that estimates moved sharply higher.

All 5 of the current 2010 estimates moved higher in the last week, pushing the Zacks Consensus up to $3.46 from $2.52 in that time. This is at the high end of the company’s new guidance range.

Value Fundamentals

Cytec Industries has attractive value characteristics. It has a forward P/E of 14.6, which is about inline with the industry average.

Its price-to-book ratio of 1.6 is slightly under the industry average of 2.0- and well within the value parameters of under 3.0.

The price-to-sales ratio is also flashing value at 0.8 whereas the industry is at 0.9.

The company also pays a dividend with a yield of 0.1%.

Cytec Industries is a Zacks #1 Rank (strong buy) stock.

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