Metalico Inc.

Metalico Inc. (MEA - Snapshot Report) saw improvement in the first quarter as sales jumped 152% over a year ago. Metalico took a loss in 2009 but is on track for a profitable 2010.

It's been nearly 2 years since I last reviewed Metalico as a Zacks #1 Rank (strong buy) stock. Back in 2008, metals and metal-related companies were soaring.

But with the recession came a crash in metal prices. Metal or metal-related stocks, including Metalico, were crushed in the great stock sell-off.

Metalico has two operating segments: ferrous and non-ferrous scrap metal recycling and fabrication of lead-based products. It operates 24 recycling facilities in New York, Pennsylvania, Ohio, West Virginia, New Jersey, Texas, and Mississippi and 4 lead fabricating plants in Alabama, Illinois and California.

Metalico Surprised in the First Quarter

On May 6, Metalico reported first quarter results which beat the Zacks Consensus by 6 cents. Earnings per share were 14 cents compared to the consensus of 8 cents. It was the third surprise in the last 4 quarters.

Sales jumped to $134.1 million from $80.8 million in the first quarter of 2009.

Quarter over quarter, unit volumes shipped rose by 110% for ferrous scrap, 37% for non-ferrous scrap and 8% for lead product shipments. The Platinum Group Metal ("PGM") saw unit volumes remain unchanged.

Compared to a year ago, when the economic conditions were bleak, the company saw volume gains nearly across the board. Unit volumes shipped rose by 90% for ferrous scrap and 74% for non-ferrous scrap. PGM volumes tripled. Lead product shipments, however, fell 37% primarily due to a slowdown in ammunition product related sales.

"The scrap metal industry is known for being highly cyclical and I believe we are in a generally positive phase in the cycle that could be around for the remainder of this year, although volatile commodity price swings like we are experiencing this week likely occur," said Carlos E. Agüero, CEO.

Zacks Consensus Estimates Rise

We haven't yet seen many changes to estimates following the company's first quarter report. However, in the last 60 days, the 2010 Zacks Consensus Estimate has risen by 3 cents to 40 cents per share. This is much higher than 2009 results, which was a loss of 23 cents per share.

Analysts expect earnings per share gains of 275% in 2010 and another 47% in 2011.

Value Fundamentals

Metalico is a value stock with a forward P/E of 14.8, even though it's on the higher end of the "value" end of the spectrum. It still has an attractive price-to-book ratio, however, of 1.8 which is in-line with the industry average.

Metalico also has a 5-year average return on equity (ROE) of 22.1%.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.

Read the full analyst report on MEA