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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 (NYSE: NEU ) 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.
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