CLEVELAND - Compounder M.A. Hanna Co. received a strong buy recommendation from Morgan Stanley & Co. Inc. The New York-based equity research firm recently cited several factors: energized management, organizational changes and expected sales growth. The report was Morgan Stanley's first on Hanna.
Cleveland-based Hanna recruited key managers from outside the industry, offering a diverse background, said analyst Mark R. Gulley. President and Chief Operating Officer Douglas Mc-Gregor is from Rockwell Inter-national Corp.; Doug Shrank, head of the North American plastics group, previously worked at Sealy and Pillsbury; and Ken Durrah, head of shapes distribution, also came from Rockwell.
Gulley said Hanna, which grew through a series of about 20 acquisitions, had acted as a decentralized holding company, ``even to the point of allowing complementary divisions to actually compete somewhat in the marketplace.''
But management merged divisions and cut redundant costs, he said. In North America, Hanna has encouraged cross-selling among its colors, resin compounds and resin distribution divisions, he said.
Hanna's sales growth as been a steady 17 percent since 1991. In that period, Gulley said, volumes have grown 11/2 times the growth of the plastics industry and 21/2 times gross domestic product growth.
Investment concerns include Hanna's low international business and low operating profit margins (6.1 percent in 1995).
Gulley set a 12-month price target of $25-$26, with an estimated earnings of $1.25 per share for 1996 and $1.50 for 1997. Hanna, which trades on the New York Stock Exchange, closed Aug. 23 at 221/8.