Summary: The Calumet Lubricants Co. has been around a long time, but Calumet Specialty Products Partners LP stock (CLMT) has only a year of trading history as a unique entity. The chart looks great. CLMT has been making new 52-weeks highs, and it is easy to see why. The L.P. units are yielding close to 5.5% and the valuation numbers look quite good. This security has been trading with a relatively high correlation to the financial, consumer staples and consumer discretionary sectors, and a relatively low correlation to the energy, technology, and health care sectors. I have some reservations about jumping in because of the lack of long-term financial data, and I anticipate widespread weakness in the stock market, but I would consider buying CLMT after a pullback.
Description of business from the company’s website: “When Calumet was founded in 1916, it was our goal to make the highest quality naphthenic specialty oils available. Since that time, we’ve devoted ourselves to making this goal a reality. The refining of petroleum has come a long way since 1916. There have been many advances—better processing methods, improved equipment and chemical discoveries. Throughout, we’ve stayed at the forefront of technology. Our equipment is modernized and our operations are diverse and efficient. Operating three refineries in Northwest Louisiana and a terminal in Burnham, IL Calumet’s capacity has grown notably in the last decade. But it takes more than high technology to produce an excellent product. Our people are committed to the constant improvement of our products. We do more than just test our oils, we continuously manufacture quality into our products and service. Our quality processes, our dedicated employees, and optimum technologies combine to give our customers the superior products they require and deserve.
Calumet produces a full line of naphthenic and paraffinic oils as well as aliphatic solvents and paraffin and microcrystalline waxes. Our Princeton, Louisiana refinery produces a premium line of Naphthenic Base and Process Oils as well as diverse products such as refrigeration oils, shock absorber oils and electrical insulation oils. Considered our flagship refinery, Princeton provides both truck and rail car service throughout the country.
Acquired in 2001, Calumet’s Shreveport facility is a complete specialty refinery. Shreveport is successful in its ability to produce paraffinic base oils and fully refined paraffin waxes. Shreveport also produces both Naphthenic and Paraffinic Bright Stocks.
Shreveport was a welcomed addition to the Calumet family. Synergies abound as Calumet owns and operates all active refining assets in Northwest Louisiana. The future is bright at Shreveport as many new products are in various levels of development.
A wide range of aliphatic solvents is produced at our Cotton Valley, Louisiana refinery. The product range includes hydrotreated low aromatic solvents and low vapor pressure solvents as well as conventionally refined products. These specialty solvents find applications in a wide variety of markets including paints and coatings, inks, extraction and mining. The product line includes Heptane, Rubber Solvents, VM&P, Mineral Spirits, K-1 and Mineral Seal Oil.
Our Burnham terminal contains a manufacturing and bulk storage facility with the capacity to hold over six million gallons as a terminal for tank truck delivery throughout the upper Midwest. The remainder of the United States is served by railcar, and international transportation is by ship. It’s important to us that you receive your shipment on time and within specifications. We’re not content until you are completely satisfied with the performance of our products, and the performance of our company.”
Is the size of firm over 1 billion market capitalization? Yes, 1.3B.
Price to earnings analysis: is the current P/E ratio below 20? Yes, 14.8.
Has the stock’s performance equaled or exceeded the performance of the S&P? Yes, so far.
Volatility: Is the stock’s beta less than or equal to 1.00? Insufficient data for 3-year beta. Beta is 1.00 per Google Finance.
Price to assets analysis: is the P/B ratio below 2.5? Yes, 1.8.
Price to cash flow analysis: is the current P/CF ratio below 20? Yes, 7.18.
Does the stock’s dividend yield exceed the yield of the S&P 500? Yes, 5.48 vs. 2.13.
Dividend growth – does the five year dividend growth rate exceed the S&P’s dividend growth rate? Insufficient data, but it appears dividend growth will be excellent. The quarterly distribution was just increased to .60 per limited partner unit, up .05 or 9% from the previous payout in November.
Dividend payout analysis: Is the payout ratio less than 50%? Insufficient data. The payout appears reasonable in terms of earnings and free cash flow.
Current ratio analysis: Is the current ratio greater than 2.0? Yes, 2.68.
Debt to equity ratio analysis: Is the total debt to equity ratio less than 1.0? Yes, .15.
Interest coverage analysis: Does the interest coverage ratio exceed 3.0? Yes, 3.41.
Earnings stability – has there been positive net income for each of the prior ten years? Insufficient data. Yes, as to the prior two years.
Earnings growth – is net income for the company greater than five years ago, preferably at least 1/3 greater? Insufficient data. There was a 26% increase from 2004 to 2005.
Is the business simple and understandable? Yes.
Does the business have favorable long term prospects? Yes. The Calumet brand name is not well known to me, but that is not surprising; most of their products are used in industrial processes and by other manufacturers.
Are company insiders buying more stock than they are selling? Yes.
Does the expected annual total return exceed 10%? Yes, it looks like it could be as high as 25%.
Does technical analysis reveal a convincing uptrend? Yes.