Stepan Earnings Preview

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Investors braced for a bumpy ride ahead of Stepan's (NYS: SCL) earnings announcement as the company has wavered between beating and falling short of analyst predictions during the past fiscal year. The company will unveil its latest earnings on Wednesday. Stepan is engaged in the production and sale of specialty and intermediate chemicals that are sold to other manufacturers for use in a variety of end products.

What analysts say:

  • Buy, sell, or hold?: Analysts are very bullish on this stock, unanimously backing it as a buy. Analysts like Stepan better than competitor WD-40 overall. Zero out of five analysts rate WD-40 a buy compared to one of one for Stepan. Stepan's rating hasn't changed over the past three months.
  • Revenue forecasts: On average, analysts predict $425.5 million in revenue this quarter. That would represent a rise of 16% from the year-ago quarter.
  • Wall Street earnings expectations: The average analyst estimate is earnings of $1.96 per share. Estimates range from $1.78 to $2.13.

What our community says:
CAPS All-Stars are solidly behind the stock with 82.4% granting it an outperform rating. The community at large agrees with the All-Stars with 90% assigning it a rating of outperform. Fools are keen on Stepan, though the message boards have been quiet lately with only 25 posts in the past 30 days. Stepan's bearish CAPS rating of two out of five stars falls short of the Fool community sentiment.

Management:
Stepan's profit has risen year over year by an average of 2.1% over the past five quarters. The company's gross margin shrank by 2.7 percentage points in the last quarter. Revenue rose 30.1% while cost of sales rose 34.4% to $407.4 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q2

Q1

Q4

Q3

Gross Margin

14.6%

14.6%

14%

15.9%

Operating Margin

7.1%

7.1%

3.7%

8.5%

Net Margin

4.4%

4.4%

2.4%

5.2%

One final thing: If you want to keep tabs on Stepan movements, and for more analysis on the company, make sure you add it to your watchlist.

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At the time this article was published

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