Zoltek Cos. (NASDAQ: ZOLT), New Product Lines, Attractive Outlook

Zoltek Cos. (NASDAQ: ZOLT), New Product Lines, Attractive Outlook

There are companies that become attractive investments due to new product lines, better services, expansion and perhaps better management. Some companies benefit from tax credits due to their operations focusing on green technology and more environmental friendly processes that help conserve natural resources. The main appeal that many of the companies in this sector hold is that there is no limitation to their growth. With federal support through regulation and credits, eco-friendly companies can benefit from less costly expansion efforts. President Obama has made it clear that he will continue to support these areas as they are the future to the US economy. This makes companies such as Zoltek an interesting investment to have in the portfolio.

Zoltek Cos. (NASDAQ: ZOLT), founded in 1975, manufactures carbon fibers and technical fibers primarily in the United States, Europe, and Asia. The company got some welcoming news recently as the federal Production Tax Credit which has assisted the wind industry to grow over the last several years, has been extended for one more year. The tax credit provides about 2.2 cents for each kilowatt hour of electricity that is produced by wind projects that start construction in 2013. The credit provides incentive for companies that operate in the industry to expand their infrastructure at a discounted price. More production leads to increased revenue and is opportunity for companies gain market share.

Companies such as component maker ABB, Ltd. (NYSE: ABB) Emerson and electric and carbon fiber manufacturer Zoltek, all stand to increase business in 2013. CEO of Zoltek, Rumy, stated that “the extension could alleviate concerns over the fundamentals in the wind industry.” Many analysts were concerned that sector would not be as attractive without the tax credit, but those concerns have now abated. CEO Rumy went on to note that “this is definitely helpful because investors were holding back on projects to see what would happen.” Zoltek was already having a great year in 2012 due to growth in the industry, and is expected to keep that momentum going into 2013.

For the fourth quarter of fiscal 2012, ended September 30, Zoltek reported net sales of $44.2 million, compared to $43.1 million in the fourth quarter of fiscal 2011. Zoltek had operating income of $5.3 million for the latest quarter and net income of $4.2 million, or $0.13 per share. In the fourth quarter of the previous fiscal year, Zoltek reported operating income of $1.0 million and net income of $4.6 million, or $0.14 per share, which included a foreign currency gain of $3.5 million. For the year as a whole, Zoltek’s net sales increased 22.8% to $186.3 million in fiscal 2012 from $151.7 million in fiscal 2011.  In fiscal 2012, Zoltek’s operating income was $25.6 million and net income was $22.9 million, or $0.67 per share, which compare to an operating loss of $4.7 million and a net loss of $3.6 million, or $0.10 per share, in fiscal 2011.

The stock currently trades at $8.24 and has a 52-week range of $6.02 – $15.01. With a market cap of $283 million the company has a high beta of 2.83, so the stock is not for those with a weak stomach. The company earned a record profit last year after losing money in nine of the previous 10 years, and could be one of the best turn around stories of 2013.