Valvoline Now a Strong Buy on Inorganic Prospects, ’17 View – March 20, 2017


On Mar 18, Zacks Investment Research upgraded Valvoline Inc. (VVV Free Report) to a Zacks Rank #1 (Strong Buy). Going by the Zacks model, companies sporting a Zacks Rank #1 have strong chances of outperforming the broader market.

In the last one month, Valvoline’s shares yielded a return of 4.22%, outperforming the gain of 1.54% recorded by the Zacks categorized Chemicals Specialty industry.

Why the Upgrade?

Market sentiments have been favoring Valvoline since the company reported better-than-expected results for first-quarter fiscal 2017 (ended Dec 31, 2016) on Jan 26. In the quarter, the company’s earnings of 35 cents per share exceeded the Zacks Consensus Estimate of 30 cents by 16.67%.  

Anticipating solid growth through the fiscal year 2017, Valvoline has raised its fiscal 2017 earnings forecast to $1.36−$1.43 per share from the earlier prediction of $1.31−$1.41. Also, sales are now predicted to grow 4−7% year over year compared with the previous forecast of 3−5%.  

In addition, Valvoline follows a policy of acquiring meaningful businesses or assets to expand its business prospects. In February, the company acquired assets related to 28 quick-lube stores from Time-It Lube LLC and Time-It Lube of Texas, LP for an undisclosed amount. The acquired assets initiated the company’s business in Louisiana and expanded operations in East Texas.

Investors seem to be optimistic about Valvoline’s future prospects, as evident from positive revision in earnings estimates. Over the last 60 days, the Zacks Consensus Estimate for the stock grew 4.6% to $1.37 for fiscal 2017 and by 4.3% to $1.47 for fiscal 2018.

Other Stocks to Consider

Valvoline has a market capitalization of $4.9 billion. Other stocks worth considering in the chemical specialty industry include KMG Chemicals, Inc. (KMG Free Report) , Versum Materials, Inc. (VSM Free Report) and BioAmber Inc. (BIOA Free Report) . While both KMG Chemicals and Versum Materials sport a Zacks Rank #1, BioAmber Inc. carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.     

KMG Chemicals, Inc. reported better-than-expected results in the last quarter, with a positive earnings surprise of 35.71%. Also, bottom-line expectations for fiscal 2017 and fiscal 2018 improved over the past 60 days.

Versum Materials, Inc.’s earnings estimates for fiscal 2017 and fiscal 2018 have been revised upward, over the last 60 days. Also, results were better-than-expected with an earnings surprise of 17.50%, in the last quarter.

BioAmber Inc. has witnessed positive revisions in bottom-line estimates for 2017 and 2018, over the past 60 days.

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