SHAWCOR LTD. $41 - Toronto symbol SCL

SHAWCOR LTD. $41 (Toronto symbol SCL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.5 million; Market cap: $2.6 billion; Price-to-sales ratio: 1.6; Dividend yield: 1.5%; TSINetwork Rating: Average; www.shawcor.com) makes sealants and coatings that keep oil and natural gas pipelines from rusting. It also makes industrial products, like electrical wire and protective sheaths.

The company recently sold its 50% stake in a joint venture that operates a pipe-coating facility in Brazil for $29.7 million U.S. It also wrote down the value of its other Brazilian deepwater pipe-coating subsidiary by $28.5 million (Canadian).

As a result, ShawCor’s earnings dropped 92.3% in the third quarter of 2014, to $5.6 million, or $0.09 a share. Without the writedown and other unusual items, it earned $0.51 a share in the latest quarter. A year earlier, the company earned $73.0 million, or $1.21 a share. Revenue fell 10.7%, to $469.6 million from $525.8 million.

However, ShawCor’s strong reputation continues to help it win new contracts. For example, it recently received a $200-million U.S. contract to coat underwater pipelines for the second stage of the Shah Deniz project, which pumps natural gas under the Caspian Sea to Turkey. From there, other pipelines pump the gas to Italy.

If you include an earlier order, ShawCor has now secured $500 million U.S. in contracts for this project. ShawCor expects to complete these jobs in 2015.

The company’s earnings per share will likely fall 24.8% in 2014, to $2.64. However, it could earn $3.79 a share in 2015, and the stock trades at a low 10.8 times that forecast. The $0.60 dividend yields 1.5%.

ShawCor is a buy.

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