Specialty materials maker, Rohm & Haas Company (ROH) inspired stock buyers with surprisingly positive fourth quarter earnings news. The Philadelphia based chemicals company credited much of its earnings successes to impressive performances by their electronic materials and chemical businesses.
Analysts had widely anticipated 78 cents per share earnings during the fourth quarter. Rohm & Haas easily beat those expectations by netting 91 cents per share, and a net income of $180 million. The news was somewhat surprising giving current economic conditions and last year’s 80 cents per share fourth quarter earnings for the company.
Following normal stock trading behavior, many reactive investors pounced on the news and immediately added Rohm & Haas to their trading portfolio. Shares jumped by 6% immediately following the announcement and have held well above $50 per share as of late.
The good news for investors planning their long-term investment strategy is that the Rohm & Haas is expecting continued strong performance, based on its projections of nearly $4 in earnings per share for 2008, and over $10 billion in sales.
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Thomson Financial estimates earnings per share of $3.85 and sales of $9.45 billion for 2008, which supports the company’s announcements for 2008. With adjustments, actual earnings for 2007 were $3.41 per share, and sales were nearly $9 billion.
Investors looking to add to a personal stock portfolio should be excited about the company’s especially strong performances in electronic materials, which were up 23%, electronic technologies, which were up 16%, and salt sales, which climbed 57%. These numbers indicate a strong demand in the market for products that use these materials, which is promising considering current economic conditions.
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One of the challenges facing and Rohm and Haas and other specialty materials makers is the potential for recession in the United States. Demand for electronic materials and others may be affected if consumers are not buying products from businesses. If businesses see a strong drop off in consumer demand there would be a domino effect for materials suppliers.
While there are many investing strategies implemented by both personal stock investors and professional traders, stock trading is impacted by future expectations for a company’s performance. Speculative markets are very reactive to news or expectations for future performance.
Announcements in line with market expectations generally cause little impact on stock trading. When a company like Rohm & Haas exceeds expectations, the market reacts positively to the unplanned result. Additionally, future projections that indicate strong growth provide stimulation for new investors looking to get in early before the next reporting cycle.
Another reason investors in Rohm & Haas could see high returns on investment in the coming year is because of declared annual dividend of $1.48, or a dividend of 37 cents per quarter during 2008. Combined with analyst estimates of a $62-63 one-year price target, there is no question as to why the stock seems poised for strong growth in the coming months.
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