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Walston &Co. – – – – I n c ….;. Members New York Stock Exchange NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO BASLE (Sw,h.dj OFFICES COAST TO COAST CONNECTED BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LmER March 1, 1957 AMERICAN CYANAMID COMPANY statistics Current PrJ-ce..–,, 71 , ,. Current Dividend –3.00' Current Yield 4.2 Funded Debt 33..5705 CCuumm..CCoonnvv..PPffdd.. Common stock 94,750,000 152,129 shs. 10,2579.,911050 shs. shs. Sales-1956 Earned Per Share-1956 500/6 51 4.21 ,279 Mkt.Range 1957-56 79 1/2 – 61 Called for redemption March 29,1957 This letter has often pointed out the inherent growt-hpotential -in- the-..che-..,…,.. – -i' mical industry. The high- profit margins, heavy re- search expenditures, new product development and- other factors which cha- racterize the industrY,have resulted in a truly amazing growth trend over the past ten years resulted in high price-earnings and low yields for most lead- ing chemical companies. Des- pite the long term upward Convertible into 2 &hs.common Exclud i ng 1.08 non-recurring income. trend, 1956 was a poor year tfhoer pmroesstspurroedoufcehresa. vyUncdoemr– petition and higher costs, profit margins narrowed and priced, declined as much as m30any chemical from thei r stocks, which had been fully bull market highs. A notable exception to this rule was the stock of American Cyanamid Company which, …of-.79 1/2. The reason for this small decline is easy to find since Cyana-mid was one of the few companies to show an increase in net income in 1956 and, more significantly, a well-maintained profit margin. Most interesting, despite the fact that the stock has declined far less than that of any other chemical company, it is still,at current levels, the cheapest in relation to 1956 earnings and the highest yielding of the six major chemical stocks. The management has announced that a two-forosnhearsepholiltdeirss. under consideration, subject to approval of the common Current Current PiE Yield Ratio ;f After Tax Pft. ;f Chagge in Per Sh.Earn. Margin 19'3b 1955 1955-1956 1947-1956 Amer.Cyan. Allied Chern. Dow Chern. (1) Du Pont Monsanto Union Carbide 16.9 18.6 2251..42 2127..27 4.2 8.8 8.6 3.5 3.4 23..70( 7.0 9.6 13. 6 8.4 10.2 )15.7 (2) 182..88 3.1 7.1 8.1 9.5 3.3 11.0 11.8 .J. 0.6 (1) All figures for 12 months ended November 30, ,-1956, (2) From operations. Excludes General Motors dividends. (3) Estimated. t 184 t 38 f- 89 t 232 t- 50 45 -. The above table presents some comparative statistics on American Cyanamid and the other five major chemical producers. As can be seen in columns 3 and 4 above, Cyanamid was the only chemical producer which was able to increase its 1956 profit margin over 1955 results. It was also the only chemical company, with the exception of Dow, to show a large increase in per-share earnings in 1956 over 1955. Actually, increase in dollar net was much higher than shown in the above table, but some dilution was effected by the issuance of stock in connection with the ThIS letter IS not. and under no Circumstance'! IS to he construed as, an offer to sell or a solicitatIOn to buy any secUrities referred to herem The information contained herein lS not Iuarllntced as to accuracy or completeness and the furnishing thereof IS not, and under no lS to be construed as, a representabon by Walston & Co Inc All expresSIOns of OpinIOn are subJect to change without notIce Walston & Co, Inc, or any Officer, Director or Stockholder thereat, may have un Interest In the securities mentioned herein ThiS market letter IS Intended and presented merely as a Jeneral, Informal commentary on day to day market news and not as a complete analYSIs. Add.tlOnaimiormatwn l\ith respect to any securltles referred to herem WllJ bc furmsbcd upon request. 'VN 801 -2- acquisition of the formica Company. The table above also shows that Cyanamid has the best ten-year growth record of any of the six companies with the exception of DuPont. Despite this impressive statistical exhibit, the current market capitalizes Cyanamid's earnings at a lower rate than that of any other company and the current yield is significantly higher than that available from any other chemical company. Surely all this makes the stock worthy of investor attention. Part of the reason for Cyanamid's growth may be found in the fact that it is the only chemical company with a large percentage of sales – more than a third – in the expanding ethical drug field. In addition, its-geographical and marketing diversifcation — not more than 10 of non-drJlgi'lalesgoto caJ1YQJleind)lstr'Y—rendersit lessvlllrrerableto,.- – nappenIn-gs ina particular -The company-has thlrty-s-ix domestiC and Canadian plants and is divided into eight producing divisions and a research division which does basic research on all product lines. A full description of all of Cyanamid's product line would require more space than is available in this report, but it includes a wide line of chemical and drug products with significant growth potential. Among them are agricultural chemicals, bulk pharmaceuticals, industrial chemi cals used by the paper, petroleum and metal processing industries, antibiotics, miscellaneous ethical drugs, organic chemicals, dyes, explosives, resins, pigments and plastics. New product development plays an important part in the company's sales and a few special products are worthy of note. The Formica Company, acquired in 1956, manufactures an impor tant plastic widely used in the home furnishings field. Formica is understood to be a relatively high-profit-margin item. A new plant is now being constructed in Pensacola, Florida, to manufacture Creslan,a new acrylic fiber which is said to be superior to many of the old acrylics now on the market. Acrylonitrile, of which American Cyanamid is a major producer, is used not only in textiles but also in the plastics and -synthetic rubber fields. The-drug subsidiary, Lederle Laboratories, produces aureomycin and the broad-spectrum antibiotic, tetracycline. -Despit-e- Cyanamid'sterr1fic rate–C;reXpansion andproJectea 'high—– rate of capital expenditures, it is not expected that any new financing will be required over the next few years, thus insuring that all growth in net will accrue to the benefit of the common stockholders. Current cash and working capital position is unusually strong — even in-a field where a strong financial position is normally taken for granted – thus underscoring Cyanamid's ability to finance its growth internally. Based on all available projections, per share earnings for 1957 could be significantly better than the 4.21 shown in 1956. From a technical point of View, the stock has a long term objective of 140 with a first objective of 90-100. Strong support is evidenced at 65, thus making the stock a suitable purchase at current market levels. American Cyanamid is recommended as the most suitable representation in the chemical industry at this time and as an investment quality stock offering moderate yield and above-average growth potential. EDMUND vI. TABELL WALSTON & CO.INC. AWTamb
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