Lubrizol Corporation (LZ) continues to have attractive valuations even though the stock has been on a tear in 2009. LZ is trading at just 9.84x forward earnings.

Company Description

Lubrizol manufactures specialty chemicals including lubricant additives for engine oils and fuel additives for gasoline and diesel fuel. It also makes ingredients and additives for personal care products and pharmaceuticals, plastics technology and performance coatings.

Zacks Consensus Estimates Rise Along With Stock Price

Even as the stock has soared in 2009, Lubrizol is still a value stock as estimates have jumped along with the stock price.

From the data, it appears that Lubrizol has met estimates each of the last 3 quarters when, in reality, the company really surprised on estimates as it pre-announced results several weeks before its actual earnings date which gave analysts time to raise their estimates to meet the company’s guidance.

2009 earnings are expected to grow 78.64%. The 2009 Zacks Consensus Estimate has risen 2 cents in just the last week to $7.31 per share as 1 out of 8 covering analysts raised in that time. The company earned $4.09 per share in 2008.

The estimate is now slightly higher then the company’s October guidance range which called for $7.10 to $7.30 per share.

Analysts are more subdued on 2010, as earnings are projected to decline slightly compared to 2009. 2010 estimates, however, have also climbed in the last week to $7.20 from $7.16 per share.

Lubrizol is expected to report fourth quarter earnings on Feb 4, 2010. If the past is any indicator, investors should look for a pre-announcement on earnings early in the new year.

Third Quarter Results

On Oct 29, Lubrizol announced third quarter results which met the Zacks Consensus Estimate of $2.52 per share.

Revenue, however, declined by 6% to $1.27 billion from $1.36 billion. Lower volumes and unfavorable currency translations contributed to the revenue decline even as price and product mix improved.

The Additives segment boosted results in the quarter. The Advanced Materials segment has faced weaker end-market demand, but the company started to see a rebound in that segment in the third quarter. Overall volumes also rose compared with the second quarter.

Value Fundamentals

Lubrizol is a Zacks #1 Rank (strong buy) stock. It has a price-to-book ratio of 2.42. Lubrizol also boosts a strong 5-year average return on equity (ROE) of 14.47%. The company also pays a dividend with a current yield of 1.70%.

5-Year Chart:

You can see the wild ride the stock has been on in the last year from the 5-year chart below. Lubrizol is at 5-year highs.

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.

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