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Innospec (IOSP) Up 15% in 3 Months: What's Behind the Rally?

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Shares of Innospec Inc. IOSP have gained around 15% over the last three months. The company has also outperformed its industry’s decline of roughly 1.6% over the same time frame.  

Innospec has a market cap of roughly $1.9 billion. Average volume of shares traded in the last three months is around 124.4K.

Let’s take a look into the factors that are driving this Zacks Rank #2 (Buy) stock.


Driving Factors

Solid first-quarter results and upbeat prospects have contributed to a rally in the company’s shares. Innospec saw its profits jump 29% to $22.2 million or 90 cents per share in the first quarter from a profit of $17.2 million or 70 cents per share a year ago. Adjusted earnings of $1.02 per share for the quarter topped the Zacks Consensus Estimate of 98 cents.

The company's revenues went up 23% year over year to $360.7 million in the quarter, driven by sales gains across most segments. Innospec gained from higher volumes, positive price and mix as well as favorable currency impact across its Fuel Specialties and Performance Chemicals segments.

Innospec also declared its semi-annual dividend of 44 cents per share for first-half 2018, representing an increase of 15%. The company has beefed up its dividend every six months over the last four years with an annualized increase of between 10%-15% per year.

Innospec has an impressive earnings surprise history as the company has topped the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive surprise of 14.8%.

Earnings estimates for Innospec have also moved north over the past month, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for the second quarter has increased by around 2.8% to $1.11. The Zacks Consensus Estimate for 2018 has also moved up roughly 2.3% over the same timeframe to $4.40.

Innospec is gaining from its balanced portfolio and strategic focus on major end markets. The company, in its first-quarter call, said that it is seeing healthy customer activity across all of its core businesses. The company noted that it will remain focused on further improving margins in Performance Chemicals and other strategic businesses to boost profitability. Innospec also expects its margin improvement programs to deliver enhanced profitability later this year.

Innospec, last month, started construction on its new facility to make Drag Reducing Agents (DRAs). The site, located at Pleasanton, TX, is an extension of the existing Innospec site. The project is well advanced and the company expects beneficial production in the second half of 2018. This latest addition is complementary to the company’s existing portfolio that will allow it to serve its customers globally.

Innospec Inc. Price and Consensus


Innospec Inc. Price and Consensus | Innospec Inc. Quote

Other Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Westlake Chemical Corporation WLK, The Chemours Company CC and Celanese Corporation CE, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied roughly 79% over a year.

Chemours has an expected long-term earnings growth rate of 15.5%. The company’s shares have gained around 26% in a year.

Celanese has an expected long-term earnings growth rate of 8.9%. Its shares have rallied roughly 30% over a year.

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