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Value

Tracey Ryniec

Brush Engineered Materials Inc.

MTRN

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Brush Engineered Materials Inc. (BW) reported record first quarter sales in April as demand increased from technology customers. It is trading with a forward P/E of 14.3.

Brush Engineered Materials produces specialty engineered materials used in electrical, electronic, thermal and structural applications. Its customers are in industries including telecommunications and computers, data storage, automotive electronics and aerospace and defense.

The company has 4 segments. The Advanced Material Technologies and Services segment manufactures precious, non-precious and specialty metal products. The Specialty Engineered Alloys segment provides bulk and strip form products and hydroxide.

The Beryllium and Berryllium Composites segment manufactures beryllium products and the Engineered Materials Systems segment manufactures specialty strip metal products.

Brush Engineered Materials Posts Record Sales in the First Quarter

On Apr 29, Brush Engineered Materials reported first quarter results which surprised on the Zacks Consensus by 20 cents. Earnings per share were 45 cents compared to the Zacks Consensus of 25 cents.

Sales jumped 120% to $295.1 million from $135.4 million in the fourth quarter of 2009 as demand increased across several key markets including telecommunications and computer, data storage, optics and automotive electronics.

Increased metal prices also accounted for $19 million of the sales increase over the prior year. Organic growth, however, accounted for 60% of the increase.

Two acquisitions in recent months also were accretive to the first quarter results. With technology sales surging, its not surprising that the company also saw higher demand from technology customers, especially wireless, handset, LED and other microelectronic applications. This increased demand also continued into the second quarter.

Raised 2010 Guidance

Given the improvement the company has seen quarter over quarter at the end of 2009 and into 2010, with continuing improvement seen in the first weeks of the second quarter, in April Brush Engineered Materials raised its full year guidance to a range of $1.45 to $1.75 from its prior range of $1.15 to $1.40.

The first half of 2010 looks very strong but the company is cautious about the second half as there is uncertainty about the global recovery, including metal prices. It does believe the second half of 2010 will be better than the second half of 2009.

Zacks Consensus Estimates Rise

Given the company's big beat and the raised guidance, analysts raised estimates. In the last 30 days, the second quarter Zacks Consensus has risen an additional 5 cents to 55 cents. This is up from just 20 cents 60 days ago, before the company's earnings report.

The 2010 Zacks Consensus is a penny higher than the company's range at $1.76. This has moved up a penny in the last 30 days.

Analysts now expect earnings per share growth of 510% in 2010.

Brush Engineered Materials is expected to report second quarter results on Jul 23.

Value Fundamentals

Brush Engineered Materials has a price-to-book ratio of 1.5, which is under the industry average of 2.1. The company's price-to-sales ratio is also a value level of 0.6 while the industry average is a whopping 5.2.

Brush Engineered Materials is a Zacks #1 Rank (strong buy) stock.

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.

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