The last time corn sweetener producer Corn Products
On Oct. 18, the company reported that sales for the third quarter climbed 5% year over year. Diluted earnings per share fell 3.1%, impacted by a previously expected increase in the income tax rate from 33% to 45% (as a result of a shift between U.S. and foreign income). Talk about a tax bite! To provide some perspective, the company's earnings would have grown 19% if its tax rate hadn't moved.
High energy costs damped results in the U.S. and Canada, but strong Mexican sales of high fructose corn syrup -- the kind of sweetener used in everything from Motley Fool Inside Value pick Coca-Cola's
Results, as the company predicted, boomed in the Asia/Africa segment. Falling corn prices, nearer to historic norms, allowed South Korean operations to get back on track. A 4% volume increase for the region led to a 9% revenue increase, partially reflective of favorable currency translation gains. With an additional boost from lower raw material costs, operating income ballooned 75%.
The company stuck with its revised earnings guidance of $1.16 to $1.22 a share, down from the $1.25 earned last year and well below the $1.34 to $1.44 the company had projected much earlier in the year.
Is the stock a good value? Last quarter, I compared Corn Products to competitor Imperial Sugar
But here's something that makes sense to me: Look at the company's 19.2 forward earnings multiple (based on mid-range 2005 guidance) and compare it to the 10% annual growth analysts expect for the next five years. I'd call that rich for a company exposed to commodity risks (although the company does hedge corn to moderate price volatility). At very least, the stock is no longer value-priced.
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