Ferro Corporation: Consensus Estimates Rise

Ferro Corporation is finding profits overseas as demand for its specialty chemical products stays strong. First quarter sales jumped 15% to a company record. The company has a forward P/E of 12.29.

Company Profile

Ferro Corporation (FOE) is a specialty chemical manufacturer with manufacturing operations in 20 countries and customers in 100 countries worldwide.

FOE is one of the largest manufacturers of specialty glass and colorants, ceramic glaze frit and stain technology and porcelain enamel frit. Its products are found in electronics, solar energy, appliances, household furnishings, automotive and industrial products.

The company, a Zacks #1 Rank (Strong Buy), opened its first international operations in Canada in 1927 and expanded to Europe shortly thereafter.

Restructuring During this Economic Environment

Ferro announced on June 20 that it would stop manufacturing tile frits and tile color products at its facility in Americana, Brazil by the end of June in order to reduce operating costs. Brazilian customers will be supplied by the facilities in Mexico and Spain. FOE estimates it will save approximately $2 to $2.5 million annually.

The company will continue to produce its porcelain enamel frit and glass color and glaze products at the Brazil facility.

Ferro expects to take a two cents per share charge in the second quarter for expenses related to the reduction, including severance costs and asset impairment charges.

Ferro Reports Record First Quarter Sales

On May 6, Ferro reported first quarter earnings that met analysts estimates of 27 cents per share. The company had raised first-quarter guidance just prior to the earnings report, on Apr 21.

Income from continuing operations rose 48% to $9.2 million, or 21 cents per share, from $6.2 million, or 14 cents per share.

Sales increased 15% compared to the first-quarter 2007 to a record $607.2 million. Both international and U.S. sales grew, by 22% and 6%, respectively. All segments saw an increase in sales except for the Specialty Plastics and Other Businesses segments.

The company has been able to increase product prices to off-set rises in raw material costs. Favorable foreign currency exchange rates also drove the higher sales numbers in the quarter.

Ferro Provides Second Quarter Estimates

The company provided second quarter guidance for sales in the range of $600 to $625 million compared with sales of $554 million in the year ago period. Ferro said that the business conditions in the U.S. are expected to be difficult in the second quarter due to the problems in the housing, appliance and automotive industries.

Consensus Estimates Rise for the Second Quarter and the Full Year

Brokerage analysts have been raising consensus estimates for the second quarter and the full year in the last 60 days. For the second quarter, estimates are up two cents to 32 cents from 30 cents per share.

For the year, consensus estimates increased 6 cents to $1.20 from $1.14 in the last two months. Analysts estimate year-over-year earnings growth for 2008 at 41.18%.

Value Fundamentals

Ferro's forward P/E is 12.29. Its price-to-book is 1.54, under the industry average of 1.79. As an added bonus, the company also has a dividend yield of 3.30%.