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Among Materials sector names, the only stock rated an A by
TheStreet Ratings is
Balchem Corp.(BCPC - Get Report), of New Hampton, N.Y.
Balchem's shares closed at $36.02 Tuesday, returning 7% year-to-date.
The company manufactures and distributes ingredients and products for the food, nutritional, feed, pharmaceutical and medical sterilization industries.
The company earned $33.3 million, or $1.12 a share in 2010, increasing from $26.8 million, or 93 cents a share, in 2009. Net sales for 2010 were $255.1 million, increasing 16% from a year earlier. The consensus among analysts is for the company to earn $1.28 a share in 2011 and $1.53 a share in 2012.
The three sell-side analysts covering the company are evenly split between buy, hold and sell ratings. Timothy Ramey of D.A. Davidson reiterated his "underperform" or sell rating on the shares in February, even while saying that Balchem had reported an "outstanding" fourth quarter.
The analyst listed several risks to the company's business, including its "value added" business of "receiving bulk [ethylene oxide] via railcars and repackaging the gas in double-wall stainless steel containers." The containers are "designed to release their contents in a controlled way in the case of a fire or an explosion," and Ramey said that "any such event would have a negative impact on Balchem's ARC Specialty Products segment."
Ramey also said that
Honeywell International (HON) could easily become a competitor for Balchem's ethylene oxide business, since a Honeywell "owns the EPA registration to repackage EO."
Other threats to Balchem listed by Ramey include "the risk of technology obsolescence in value-added ingredients" in the company's Animal Nutrition and Health segment, with "larger and more sophisticated competition," including
Archer Daniels Midland (ADM - Get Report).
Written by Philip van Doorn in Jupiter, Fla.
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