SHAWCOR LTD. $33 - Toronto symbol SCL.A

SHAWCOR LTD. $33 (Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 70.7 million; Market cap: $2.3 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.2%; TSINetwork Rating: Average; www.shawcor.com) makes sealants and coatings that keep oil and gas pipelines from rusting (88% of revenue). It also manufactures electrical wire and protective sheaths (12% of revenue).

So far this year, ShawCor has won over $45 million U.S. of coating orders related to big offshore natural gas projects near Australia. In addition, it has received a $30-million U.S. contract to coat undersea pipelines for a gas platform off the coast of Indonesia.

Meanwhile, ShawCor’s revenue rose 11.7% in the three months ended March 31, 2012, to $312.3 million from $279.5 million a year earlier. The company is benefiting as pipeline operators expand their operations to handle higher oil and gas production in North America and Latin America.

Thanks to the higher revenue, ShawCor’s earnings rose 13.6%, to $23.3 million, or $0.33 a share. A year earlier, it earned $20.5 million, or $0.29 a share. The latest earnings were also helped by a $1.3-million gain on the sale of an investment, while the year-earlier quarter included a $1.4-million investment loss.

ShawCor’s balance sheet remains strong: The company holds cash of $510.6 million, or $7.22 a share. Its debt is just $6.3 million.

The stock trades at 16.2 times the $2.04 a share that ShawCor will likely earn in 2012. However, its new contracts could push up its earnings to $2.93 a share in 2013. The stock trades at a more reasonable 11.3 times that estimate.

The company also recently raised its quarterly dividend by 25.0%, to $0.10 a share from $0.08. The new annual rate of $0.40 yields 1.2%.

ShawCor is a buy.

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