With oil prices skyrocketing and the global economy in a slowdown, it might not seem like an auspicious time to invest in a chemicals company. But Ferro Corp. (NYSE:FOE) is a specialty chemicals company where the operative word is “specialty.”

Founded in 1919 to manufacture frit, the substance used in making porcelain enamel, Cleveland-based Ferro is still a global leader in the field. But, lest your eyes begin to glaze over about such a mundane product, note that Ferro is also geared up for the 21st century as it builds a 177,000-square-foot factory in China to make aluminum paste for the production of solar cells in Asia. It doesn’t get much trendier than that.

In fact, while Ferro has moved decisively since Jim Kirsch took over as chief executive in 2005 to divest non-core businesses, slash fixed costs, close old factories and consolidate production into new state-of-the-art plants, continuity is a key element of Ferro’s success.

Last year, Ferro opened a new tile glaze and stain-making factory in Castellon, Spain to supply growing European tile markets as it closed older tile color facilities in Italy and the Netherlands, and transferred production to Spain. Ferro, which set up its first foreign plant in 1927, has been producing tile color products in Castellon for 42 years.

The establishment of a porcelain enamel and tile coating factor in Suzhou, China in 2001 created a platform for Ferro to get into the solar energy business in the country and break ground last year for its new aluminum paste factory. However, Ferro first got into solar energy 25 years ago and is now the leading supplier of conductive pastes to the worldwide solar industry.

But it’s not history that has investors excited about Ferro now. The company beat analysts’ earnings estimates for the quarter ended March 31, 2008 by 20%,  and announced guidance for earnings per share of $0.30 on May 6, compared with the consensus estimate of $0.25.

Following a company presentation June 10, analysts at Credit Suisse concluded that Ferro is on target to reach a 10% operating margin by 2010 (compared with 6.6% in the quarter ended March 31), and reiterated its “outperform” rating on the stock. The Credit Suisse analysts expect 2010 earnings to top $2.25 a share, 85% above their 2008 estimate of $1.22 a share and well above current consensus estimates, offering long-term investors “a compelling risk/reward profile.”

As CEO Kirsch said in a May 7 conference call on first-quarter earnings, Ferro has been able to mitigate the impact of weak demand and increasing raw material costs in areas such as polymer additives and specialty plastics (for the automotive, construction and appliance industries in the United States). Ferro has also latched onto high-growth areas such as supplying electrolytes for rechargeable lithium ion batteries (as in cell phone and laptops), positioning it well for opportunities in hybrid or electric cars.

Ferro is targeting growth in other high-margin products. While cosmetics and pharmaceuticals are currently a small portion of its organic segment, the company is focused on products such as high-end carbohydrates for the chemotherapy market.

In the inorganic segment, pigmented inks for tile ink jet printers, metallic coatings and unleaded glass products are growth areas where Ferro is a market leader. Surface finishing for lenses is another area where the company sees strong growth. Dielectric, or insulation, products have largely been commoditized but Ferro is focusing on more specialized, high-end applications such as aerospace.

The Credit Suisse analysts suggest that Ferro might seek to strengthen its positions in surface finishing and solar energy through strategic alliances or acquisitions.

The company’s sales in the first quarter were a record $607 million, up 15% from the year-ago period. For the current quarter, ending June 30, analysts on average expect sales of $618 million, a gain of 11.7% year over year, and full-year sales of $2.43 billion, up 10.4% from the previous year. The current forecast for 2009 revenue is $2.58 billion, a gain of nearly 6% from the 2008 estimate.

Earnings for the current quarter are forecast at $0.31 a share, compared with $0.25 in the second quarter of 2007, with full-year earnings forecast at $1.23, compared with $0.83 in 2007. However, the company announced cost-cutting measures on June 20 that will entail second-quarter charges of $0.05 a share and may lead to some revisions in forecasts.

Ferro closed at $18.69 on Tuesday, valuing the company at $817 million. The 52-week high was $26.03 last July and the 52-week low was $13.52 in April. The current median target for the share price is $24, with the high target at $27. The company currently has five “buy” ratings (including three “strong buys”) and three “holds.”