Lubrizol Corporation (NYSE:LZ) -- Suffering From a Weaker Euro

Lubrizol Corporation (NYSE:LZ) is a specialty chemical company and, although it has over 6,700 employees and facilities in 27 countries, it might have become too dependent of late on a weaker US dollar. The dollar’s turnaround could have a significant impact on company earnings. To explain in more detail we turn to Agora Financial editor Dan Amoss.

According to his latest report:

“Lubrizol’s (NYSE:LZ) earnings are exposed to weakness in Europe. Relative to its sales, Lubrizol’s production is heavily based in the U.S. So a stronger U.S. dollar versus the euro is an earnings headwind. For every cent the euro falls against the U.S. dollar, earnings per share fall by roughly 3 cents.

“On April 29, management said that its 2010 earnings guidance assumed the Euro would average $1.35 for the balance of the year. At the time, the Euro was worth $1.33. With the Euro now at $1.20 and likely headed lower, it looks like earnings guidance will have to fall further.

“Lubrizol’s CFO presented at the Goldman Sachs Basic Materials conference this week. He didn’t discuss anything out of the ordinary, and didn’t mention Europe or the Euro. The mainstream investment crowd is still bullish on this stock, even as it trades at a peak multiple on peak earnings.”

Amoss, on the other hand, is not so bullish on LZ. However, out of fairness to his paid subscribers, the only way to learn his specific recommendations on Lubrizol, and on the other firms he researches, is to sign up for his newsletter, the Strategic Short Report.

It’s available through the Agora Financial reports page, which can be found here.


Rocky Vega,
The Daily Reckoning

[Nothing in this post should be considered personalized investment advice. Agora Financial employees do not receive any type of compensation from companies covered. Investment decisions should be made in consultation with a financial advisor and only after reviewing relevant financial statements.]