Why NewMarket Shares Plunged


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of petroleum additives company NewMarket slumped as much as 11% after reporting its fourth-quarter earnings results.

So what: Sometimes you can't win for trying, and today was one of those days for NewMarket. Following a special dividend of $25 in the fourth quarter, NewMarket noted total fourth-quarter sales of $516.2 million, roughly 2% higher than last year, as net income surged 57% to $3.94. Unfortunately, Wall Street had been expecting much more, to the tune of $538.9 million in revenue and $4.11 in EPS. The results were nonetheless a record for NewMarket, and management feels confident that continuing to push overseas and boosting research and development spending will allow it to produce another record year in 2013.

Now what: The growth is there, but investors expected so much more after the recent run-up. Clearly, NewMarket's management team is doing something right, and at just 12 times forward earnings it's not a particularly expensive company. However, I'd note that increased R&D costs could be a short-term drag on margins and a low to mid-single-digit sales growth rate is going to stymie a big appreciation in its share price like we witnessed in 2012. For now, it's a company worthy of the watchlist.

Craving more input? Start by adding NewMarket to your free and personalized Watchlist so you can keep up on the latest news with the company.

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The article Why NewMarket Shares Plunged originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of, and creating a bull call spread position in, Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Originally published