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Bear of the Day: DMC Global (BOOM)

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DMC Global (BOOM - Free Report) is benefiting from the recovery in the energy industry. However, this Zacks Rank #5 (Strong Sell) saw its earnings estimates cut after its Q2 earnings report.

DMC Global is a holding company that currently operates two business segments: DynaEnergetics and NobelClad. They address the energy, industrial processing and transportation markets.

It's goal is to support businesses with long-term capital and strategic, legal, technology and operating resources.

A Miss in the Second Quarter

On July 22, DMC Global reported its second quarter results and missed on the Zacks Consensus by $0.04. Earnings were $0.10 compared to the consensus of $0.14.

Sales were up 51% to $65.4 million year-over-year but also grew 18% sequentially versus the first quarter.

The company said the sales growth was due to the "accelerating recovery of the energy industry" which drove improved demand for DynaEnergetics' well perforating systems.

It also saw increased order shipments at Nobelclad.

DynaEnergetics sales were up 79% to $42.3 million year-over-year and jumped 11% sequentially from the first quarter.

NobelClad sales jumped 18% to $23.2 million versus last year but were up 33% sequentially from the first quarter.

Third Quarter Guidance Disappoints

DMC Global expects North America's onshore unconventional oil and gas market will continue to improve in the third quarter but at a more moderate pace than what was happening in the first half of the year.

Additionally, the growth is expected to be partially offset by lower sales in the Middle East.

NobelClad's sales are only expected to grow to the range of $24 to $25 million, up from $23.2 million in the second quarter.

As a result, the analysts have been adjusting their earnings estimates. They were too bullish and have had to cut.

2 estimates were cut for 2021 in the last month pushing down the Zacks Consensus Estimate to $0.56 from $0.76 in the last month.

That's still earnings growth of 700% as it only made $0.07 in 2020.

The 2022 Zacks Consensus also saw cuts, pushing it down to $1.57 from $1.95 in the last 30 days. But that's another 179% earnings growth.

Shares Fall: Is it a Buying Opportunity?

Shares of DMC Global rallied big as energy prices soared. Over the last year they were up 48%.

But they've fallen 19.3% over the last 3 months and are now up just 0.8% year-to-date.

Are they a deal?

DMC Global has a forward P/E of 76.8, so on a P/E basis the shares are still expensive even with the big earnings growth expected for 2022.

Investors might want to keep it on a watch list and see if the shares go on sale even further.


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