OMNOVA (OMN) increased revenue 3.7% to $243 million for FQ4, which exceeded estimates by $0.7 million. Earnings per share decreased 16.7% year-over-year, but beat estimates by $0.02 or 25%. The Engineered Surfaces segment performed well with a 10.2% increase in revenue to $61.6 million and a 10% increase in adjusted segment operating profit. The E.S. segment's performance resulted from favorable volume and pricing. Performance Materials achieved a 6% increase in revenue to $81.1 million due to favorable volume, pricing, and product mix. Total Performance Chemicals achieved a revenue increase of 1.6% to $181.4 million.
This quarter broke the company's bad streak of missing estimates for the previous three quarters. Since OMNOVA missed estimates for the quarters ending in February, May, and August 2014, the stock performed poorly since my in depth article about OMNOVA from April 2014. However, the company is expected to reap the benefits of about $4 million in cost savings in 2015 due to its investments in multiple facilities. This is one point that I emphasized in my last article. For that reason, the stock should perform much better in 2015 as OMNOVA achieves improved earnings performance.
I was disappointed in OMNOVA's 2014 performance. However, the FQ4 report indicates that the company will perform much better in 2015. The Q4 performance reinforces my positive outlook for OMNOVA. The company should make up for its 2014 losses as analysts expect EPS to increase by 111% to $0.55 in 2015. This is due in large part to the cost savings that I pointed out. The stock is attractively undervalued with a forward PE of 12.6 which is below the forward PE of 15.3 for the Specialty Chemicals industry. I think that the stock is likely to outperform the market in 2015 if OMNOVA can meet/exceed its earnings expectations. This thesis is supported by the low valuation and strong above average expected earnings growth.
