February 23, 2009 - Pall Corp. (PLL-NYSE) engages in the manufacture and marketing of filtration, purification, and separation products and integrated systems solutions worldwide. The company's Life Sciences segment offers technologies that facilitate the process of drug discovery, development, and production used in blood centers and hospitals at the point of patient care. It also provides medical products that enable the safety of blood transfusions and help control the spread of infections in hospitals; laboratory products used in drug discovery, gene manipulation, and proteomics applications; and cell therapy products, which enable technologies for the regenerative medicine market.

Its Industrial segment offers enabling and process enhancing technologies for the industries, such as aerospace, microelectronics and consumer electronics, municipal and industrial water, fuels, chemicals, energy, and food and beverage markets. This segment also provides filters, coalescers, and integrated separation systems for hydraulic, fuel, and lubrication systems on mechanical equipment to various industries, as well as to producers of energy, food and beverages, and municipal and industrial water. In addition, it sells filtration and fluid monitoring equipment to the aerospace industry for commercial and military aircraft, ships, and land-based military vehicles.

Further, the Industrial segment offers filtration and purification technologies for the semiconductor, data storage, fiber optic, advanced display, and materials markets, as well as a suite of contamination control solutions for chemical, gas, water, chemical mechanical polishing, and photolithography processes. The company was founded in 1946 and is based in East Hills, New York.

This is a company that should benefit from the new stimulus bill since it's a leader in water filtration infrastructure, a concern of the Obama administration. Demand for this water expertise is growing, not only in the U.S. but also in China. Pall is the world filtration leader with 7% of this highly fragmented market. Clean water is a major problem in many parts of the world, and no one is predicting a global solution any time soon.

Two other indicators that Pall will most likely see continued success: growth in medical and pharmaceutical filtration, two areas where Pall is a leader. And the company is very strong financially, with good cash flow. It has $1.417 billion in current assets against $581.5 million in current liabilities.

Earnings took a dip in 2007, going from $1.16 in 2006 to $1.02. Since then, they leaped back to $1.76 in 2008 (fiscal year ends in July). This year analysts expect $1.99 and next year $2.22. Quarterly earnings will be announced on March 11. Look for 44 cents a share. In the first quarter, earnings were up 24%, margins improved noticeably, up 170 basis points to 48.3%, and operating margins increased by 70 basis points to 13.8%.

International sales are important at Pall. They were 68% of 2008 revenues. If the dollar were to strengthen, that would negatively affect the bottom line. Revenues grew from $1.902 billion in 2005 to $2.571 billion in 2008.

More numbers: Market Cap is $2.96 billion. Forward P/E is 11.3. Return on Equity for the last 12 months was 21.03%. There's $2.25 in cash per share. Book Value is $8.64. The stock hit a 52 week high on June 17, 2008 at $43.19. The low was reached on November 21, 2008 at $21.61. There are 118.08 million shares outstanding. Insiders own .18%. Institutions own 94%. There's an annual dividend of 58 cents for a yield of 2.2%.

Pall is well positioned for continued growth, a leader in several fields, and has a strong balance sheet. The administration's stimulus program should increase revenues as will the rising demand for water filtration globally. Currency fluctuations will influence the bottom line, but with margins improving, some of that concern is mitigated. Dig deeper into Pall if you're looking for a rather defensive stock in these turbulent times.

Company Web site: www.pall.com

- Ted Allrich