Solutia Inc. (SOA) shares are soaring after this week’s earnings news. Earnings per share came in at more than twice the Zacks Consensus Estimate.

Company Description

Solutia makes chemical and engineered materials for consumer and industrial applications. The company’s products range from high-performance nylon polymers and interlayers for laminated glass to chemicals for the rubber industry and hydraulic fluids for aviation.

Crushed Estimates

On Jan 27 Solutia reported quarterly results that showed net income of $52 million on a 10% increase in net sales, to $429 million.

This lead to earnings per share of 43 cents, more than double the 18 cents analysts were expecting. This quarter marks the third consecutive earnings surprise.

Estimates were rising heading into the earnings release, but we have not had any since the report. This is not surprising, given that it was just a couple days ago and we expect to see upward revisions soon.

Valuations

Solutia shares are trading at a discount, about 14 time forward earnings. The price-to-sales ratio is about 0.93, lower than the norm for the industry, which is about 0.99 times.

Additionally, Solutia operates with better margins than its peers. The company’s gross margin is about 33% while its peers are closer to 30%. It operating margin is 18.5%, much better than the industry average of 4.6%.

The Chart

Shares of SOA surged on the earnings news, setting a new 52-week high.

Bill Wilton is the Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Growth Trader service

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