LSB Industries: Heating up

LSB Industries, Inc. (AMEX: LXU)
Oklahoma City, Okla.
http://www.lsb-okc.com/

52-week low / high: $11.85 / $28.85
Shares Outstanding: 20.83 million
Market Capitalization: $544million

Those looking for investment ideas in a tight economy might be interested in LSB Industries, Inc. (AMEX: LXU). LSB’s geothermal heat pumps can be used by consumers looking to save on their energy bills because the pumps use solar energy stored in the earth to provide climate control and hot water. With an installed base of more than 3 million, LSB’s units are used in locations as diverse as the Statue of Liberty, the Rockefeller Center, luxury Las Vegas hotels and family residences.

Some of LSB’s products use non-ozone depleting refrigerants. The units also provide “free” domestic hot water and noise-free operation, and have a long lifespan of around 50 years.

The Oklahoma City-based firm is involved in two diverse businesses: chemicals and climate control. About 53% of the company’s business comes from chemicals, 45% from climate control and 2% from engineered products. LSB employs about 1,900 people and has six manufacturing and distribution facilities in Texas, Oklahoma, Arkansas and Alabama.

LSB Industries was founded in 1961 and had its initial public offering in 1969. Why should investors take notice of the 47-year-old company? Because LSB’s products are energy efficient, use less fossil fuels and release fewer greenhouse gases, some investment professionals, including CNBC’s Jim Cramer, think any energy-related legislation under a new presidency could offer significant upside to the company.

In other good news for investors, LSB isn’t that well known. The company’s average daily trading volume is only about 300,000 shares. Also, only one investment bank —  Avondale Partners — covers the company. Avondale ranks the company as a “market outperform” and with good reason.

Over the last three years, LSB has posted earnings-per-share growth of 102%. During the last-reported third quarter, the company posted net income of $18.3 million, or $0.77 per share, soaring 423% from $3.5 million, or $0.18 per share, a year earlier. The firm’s quarterly net sale increased 19% to $147.6 million, from $124 million.

In a January interview with The Oklahoman, LSB President Barry Golsen said the company completed a record year “in all resepects.”

"Both of those core businesses are market and technology leaders in their products," Golsen said. "We've had many local plant expansions, we've hired hundreds of new employees and we're now a very major employer in Oklahoma City."

Going forward, he said LSB is well-positioned to maintain its competitive positions.

There are, of course, risks. LSB is exposed to the weak domestic housing market and a further slowdown would reduce demand for its residential products. Also, a recession would negatively impact demand for chemicals. Still, the potential for upside is compelling and smart investors should take a good look at LSB Industries.

Note: LSB Industries, Inc. (AMEX: LXU) is on the “Watch List” of Rising Star Stocks, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, LSB displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Rising Star Stocks portfolio at a later date.

---You can read the FULL article when you register (registration is free!) or sign-in to SmallCapInvestor.com---