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OMNOVA Solutions Now a Strong Buy on Solid Q2 & Outlook

Zacks Equity Research

Zacks Investment Research upgraded OMNOVA Solutions Inc. OMN to a Zacks Rank #1 (Strong Buy) on Jul 5, 2016. Going by the Zacks model, companies sporting a Zacks Rank #1 have strong chances of outperforming the broader market over the next few quarters.

Why the Upgrade?

Market sentiments have been favoring OMNOVA Solutions, as evident from the year-to-date return of roughly 22.7%. Also, the company posted an average positive earnings surprise of 78.57% for the last four quarters.

In the recently reported second quarter of fiscal 2016 (ended May 2016), OMNOVA Solutions’ earnings of 18 cents per share exceeded the Zacks Consensus Estimate of 14 cents by 28.57%. The year-over-year fall of 8.3% in revenues was more than offset by a 14.2% increase in cost of sales, leading to 490 basis points rise in gross profit margin.

For the quarters ahead, OMNOVA Solutions aims to improve its earnings per share on the back of an effective product mix, business expansion, costs reductions and margin expansion. Also, the company anticipates leveraging benefits from its newly introduced products, including PLIOTEC HDT16 resin for superior DTM (Direct to Metal) paints and multi-surface renovation paints, SUNCRYL HP98 water-based release coating for paper and film, etc.

Impressive financial results and future outlook have boosted investors’ optimism regarding OMNOVA Solutions’ prospects. Over the last seven days, the Zacks Consensus Estimate for the stock has increased 6.3% to 17 cents per share for the third quarter and 4.3% to 73 cents for fiscal 2017, while the same remained stable at 53 cents for fiscal 2016. Also, the company has an Earnings ESP of +2.74% for fiscal 2017.

OMNOVA SOLUTION Price and Consensus

OMNOVA SOLUTION Price and Consensus | OMNOVA SOLUTION Quote

Other Stocks to Consider

OMNOVA Solutions Inc. currently has a market capitalization of approximately $339 million. Other stocks worth considering in the industry include AgroFresh Solutions, Inc. AGFS, Chemtura Corporation CHMT and Ferro Corporation FOE. All these carry a Zacks Rank #2 (Buy).

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