1. Balchem Corp.

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Among Materials sector names, the only stock rated an A by TheStreet Ratings is Balchem Corp. ( BCPC), 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).

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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