CPO Ingredion, Inc.

Despite negative press here in the United States, corn sweeteners have become very popular among the booming middle classes of the emerging markets. That is good news for Corn Products International, Inc. (CPO), a leading corn refiner.

Despite the recent volatility in its share price, consensus estimates have risen steadily over the last several months. It is a Zacks #1 Rank (Strong Buy) stock.

The valuation picture looks attractive with shares trading at just 10x forward earnings. The company also recently raised its quarterly dividend by 25%. It currently yields 1.5%.

Third Quarter Results

Corn Products International delivered better than expected results for the third quarter of 2011. Earnings per share came in at $1.20, beating the Zacks Consensus Estimate by 10 cents. It was a stellar 48% increase over the same quarter in 2010.

Net sales soared 60% to $1.628 billion, well ahead of the Zacks Consensus Estimate of $1.579 billion. The increase was due in part to an acquisition, but organic sales growth was strong too. Organic volume was up 2% year-over-year, driven by an 8% increase in North America.

Despite rising input costs, the gross profit margin actually expanded from 16.8% to 17.0% of net sales. This is because the company was able to pass through the higher costs through higher prices while still increasing sales volumes. That's a sign of strong demand.

Meanwhile, adjusted operating income surged 48% year-over-year.

Estimates Rising

Following the strong third quarter, analysts revised their estimates significantly higher for both 2011 and 2012, sending the stock to a Zacks #1 Rank (Strong Buy) stock.

As you can see in the company's Price & Consensus chart, consensus estimates have steadily risen over the last several months despite the volatility in share price:

The Zacks Consensus Estimate for 2011 is now $4.69, representing 45% EPS growth over 2010. The 2012 consensus estimate is currently $5.11, a 9% increase over 2011.

Dividend

The company has also been steadily increasing its dividend over the last several years. Since 2000, Corn Products has raised its dividend at a compound annual rate of 15%, including a 25% increase in December.

It currently yields 1.5%.

Valuation

Due to fears over a global economic slowdown, shares of CPO have gotten beaten up since late last summer. They have come back a bit since then but are still below their previous highs. This has led to some compelling valuations.

Shares trade at just 10.2x 12-month forward earnings, well below the industry median of 14.2x and its 10-year median of 14.6x.

The Bottom Line

With consensus estimates continuing to rise, strong growth projections, and a solid 1.5% dividend yield, shares look awfully attractive at just 10x forward earnings.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

 
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