QUAKER CHEMICAL CORP. $75 (New York symbol KWR; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 13.2 million; Market cap: $990.0 million; Price-to-sales ratio: 1.4; Dividend yield: 1.3%; TSINetwork Rating: Average; www.quakerchem.com) makes lubricants and chemicals that keep mechanical parts from rusting.
Quaker needs oil to make its products, and rising crude prices have slowed its earnings growth. As well, it gets 60% of its sales from overseas, and the higher U.S. dollar has also weighed on its results.
The company has raised its prices and cut its costs in response. It has also acquired smaller, related firms, which has helped increase its sales and earnings.
In 2013, Quaker’s earnings rose 18.8%, to $56.3 million from $47.7 million in 2012. Per-share earnings gained 17.6%, to $4.27 from $3.63, on more shares outstanding. Without unusual items, earnings per share rose 10.0%, to $3.84 from $3.49.
Sales gained 3.0%, to $729.4 million from $708.2 million. Higher sales in Asia (up 7.9%) and Europe (up 7.4%) offset declines in North America (down 0.6%) and South America (down 3.8%).
Quaker is using its improving earnings to pay down debt: it ended 2013 with long-term debt of $17.3 million, down from $30.0 million a year earlier. It also held cash of $68.5 million, or $5.19 a share. That gives it plenty of room to make more acquisitions, particularly in developing countries.
Earnings should improve to $4.11 a share in 2014, and the stock trades at 18.2 times that estimate. That’s a somewhat high p/e ratio for a cyclical company that uses oil as its main raw material. The $1.00 dividend yields 1.3%.
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