Lubrizol Earnings Preview

Lubrizol (NYSE: LZ  ) beat estimates by $0.18 last quarter and investors are hoping it can beat them again. The company will unveil its latest earnings on Tuesday, July 26. Lubrizol is an innovative specialty chemical company, which produces and supplies technologies that improve the quality and performance of its customers' products in the global transportation, industrial and consumer markets.

What analysts say:
 

  • Buy, sell, or hold?: Analysts think investors should stand pat on Lubrizol with analysts unanimously rating it hold. Analysts don't like Lubrizol as much as competitor Eastman Chemical Company overall. Seven out of nine analysts rate Eastman Chemical Company a buy compared to zero of six for Lubrizol. While analysts still rate the stock a Hold, they are a little more optimistic about it compared to three months ago.
  • Revenue Forecasts: On average, analysts predict $1.51 billion in revenue this quarter. That would represent a rise of 7.9% from the year-ago quarter.
  • Wall Street Earnings Expectations: The average analyst estimate is earnings of $3.06 per share. Estimates range from $2.88 to $3.21.

What our community says:
CAPS All Stars are solidly backing the stock with 94.3% giving it an "outperform" rating. The community at large backs the All Stars with 91.5% awarding it a rating of "outperform." Fools have embraced Lubrizol, though the message boards have been quiet lately with only 60 posts in the past 30 days. Despite the majority sentiment in favor of Lubrizol, the stock has a middling CAPS rating of three out of five stars.

Management:
Lubrizol's profit has risen year over year by an average of 24.5%. Revenue has now gone up for three straight quarters. The company's gross margin shrank by 2.5 percentage points in the last quarter. Revenue rose 15.5% while cost of sales rose 19.9% to $1.04 billion 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 Q1 Q4 Q3 Q2
Gross Margin 31.7% 31.3% 32.8% 33.8%
Operating Margin 18.4% 16.4% 20.1% 22.4%
Net Margin 11.2% 11.9% 15.3% 14.4%

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