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Caesarstone Sdot-Yam (CSTE)

The shares of this countertop company were boosted by good second quarter results and a new Buy recommendation from UBS.

Caesarstone Sdot-Yam (CSTE)
from The 100% Letter

One of the best reports from the last quarter came from our quartz countertop company Caesarstone Sdot-Yam (CSTE). After the report shares jumped well over 10%...

The shares of this countertop company were boosted by good second quarter results and a new Buy recommendation from UBS.

Caesarstone Sdot-Yam (CSTE)

from The 100% Letter

One of the best reports from the last quarter came from our quartz countertop company Caesarstone Sdot-Yam (CSTE). After the report shares jumped well over 10% and are now solidly above $50. I believe they’ll keep trending higher.

The headline numbers were a 30.4% surge in sales, supported by 55% sales growth here in the U.S. CSTE’s new plant expansion at Bar Lev in Israel continues to support production growth, but the bigger news is that management has increased its U.S. investment in plant capacity by 15%, to $115 million. That means there is likelihood of a 8th and 9th production line here in the U.S.

All of this is pointing toward accelerating growth for CSTE. Revenue guidance for the year has been upped to $435-$445 million from $420-$430 million, and I fully expect the company will be on pace for $700 million in annual revenue in late 2016.

Given gross profit margins around 22%, this means CSTE should be delivering roughly $2.25 in adjusted EPS this year and $2.65 next year. At the current share price of $52.20 shares are trading at 19-times forward earnings.

That’s not a bad deal for a stock that should grow revenue and EPS by 14% and 20% next year, respectively - especially since the big jump should be in 2016, when revenue and EPS should both grow by around 25%.

Caesarstone is a buy right now.

Tyler Laundon, The 100% Letter, 100percentletter.wyattresearch.com, 866-447-8625, August 20, 2014