Stepan Inks Deal To Acquire Surfactant Facility In Mexico

Stepan Company (NYSE:SCL) , a major manufacturer of specialty and intermediate chemicals, has entered into an agreement with BASF Mexicana to acquire its surfactant production facility in Ecatepec, Mexico, with a total capacity of over 50,000 metric tons along with the associated surfactant businesses.

The production facility includes warehouse space of 124,000 square foot, office space and a large laboratory. The acquisition is expected to close in the fourth quarter of 2017, subject to customary closing conditions and fulfilment of certain other requirements. The company also specified that the transaction is expected to create minimal impact on its financial results for 2017. However, the exact financial terms of the deal were not disclosed.

The acquisition is in line with Stepan’s growth strategy in Latin America. It will considerably enhance Stepan’s supply capabilities and market position for surfactants in Mexico. It will also help the company to expand in the Functional and Consumer markets for surfactants.

Stepan’s shares have rallied around 17.6% over the past three months, outperforming the Zacks categorized Chemical-Diversified industry’s 3.1% gain.

Stepan recorded net income of $31.9 million or $1.37 per share in first-quarter 2017 compared with $27.9 million or $1.22 per share reported in the year-ago quarter.

Barring one-time expenses, the adjusted net earnings were $1.36 per share, exceeding the Zacks Consensus Estimate of $1.14.

In the reported quarter, sales from Surfactant rose 4% year over year to $322.6 million. The operating income from segment marginally rose 2.7% year over year to $37.2 million, driven by lower cost of manufacturing.

After reporting a commendable performance in the first quarter, the company provided an optimistic outlook for the remaining year. Stepan is anticipated to benefit from enhanced internal efficiencies, end-market diversification and consistent growth in core polymer markets. Even though higher raw material costs remains a concern, overall earnings are expected to grow this year.

Stepan Company Price and Consensus

Stepan Company Price and Consensus | Stepan Company Quote

Stepan currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Other Stocks to Consider

Other top-ranked companies in the basic materials space include The Sherwin-Williams Company (NYSE:SHW) , The Chemours Company (NYSE:CC) and Huntsman Corporation (NYSE:HUN) . All three stocks sport a Zacks Rank #1.

Sherwin-Williams has expected long-term earnings growth rate of 11.4%.

Chemours has expected long-term earnings growth rate of 15.5%.

Huntsman has expected long-term earnings growth rate of 7%.

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