Ahead of the Bell: Fuller 3Q surprise gets praise

Analysts praise H.B. Fuller's 3rd-quarter profit surprise , raise earnings estimates

• On 8:02 am EDT, Wednesday September 23, 2009

NEW YORK (AP) -- H.B. Fuller Co.'s significant third-quarter profit surprise drew praise from analysts and prompted one to boost his earnings outlook for the company.

H.B. Fuller, which makes adhesives, sealants, paints and other specialty chemicals, late Tuesday said its fiscal third-quarter profit jumped 63 percent, helped by a gain from the settlement of a lawsuit.

Net income rose to 72 cents per share, compared with 44 cents per share during the same period a year earlier. Excluding the settlement, net income would have been 48 cents, which still exceeded analysts' expectations of 36 cents per share.

Revenue dropped 13 percent to $315.3 million from $362 million.

The company said weak end-market demand continued throughout the third quarter, but that the year-over-year decline in volume -- down 12.4 percent -- was less than the decline in the second quarter -- 15.1 percent.

KeyBanc Capital Markets analyst Michael Sison said strong margins were a result of pricing power, lower raw materials costs, new product wins, product reformulation and sequential improvement in demand.

Sison said he believes the company can maintain this level of profitability for the next few quarters and raised his 2009 and 2010 profit estimates to $1.45 per shares and $1.70 per share, up from $1.20 per share and $1.40 per share, respectively.

Analysts polled by Thomson Reuters estimated 2009 and 2010 profits at $1.22 per share and $1.39 per share, respectively.

Sison said he expects the stock to rally on the earnings surprise and held to his rating of "Hold."

Deutsche Bank analyst Jason Miner said the company's high gross margin underscores its earnings potential once volumes recover. Miner maintained a "Hold" rating, citing weak end markets and a stock value that should move in line with sector peers.

H.B. Fuller shares rose 13 cents to close at $21.28 Tuesday.

Buzz up!