Wells Fargo Upgrades Ceradyne (CRDN) to Market Perform; XSAPI Thesis Confirmed

October 28, 2009 9:26 AM EDT

Wells Fargo upgrades Ceradyne, Inc. (Nasdaq: CRDN) from Underperform to Market Perform. Valuation range increased to $15-$17 from $14-$16.

Wells analyst says, "We are upgrading CRDN to Market Perform, as the core of our investment thesis – that further X-SAPI body armor awards were doubtful in 2010 (making consensus expectations too high) – was confirmed by Ceradyne and is now reflected in the 2010 guidance. Importantly, the rationale for our upgrade is not due to an appreciation of improving end markets or a particularly attractive valuation. Instead, it merely reflects the reset of earnings expectations to more reasonable levels where downside risk should be limited. We raised 2009E EPS to $0.15 from $0.10 for a tax benefit but cut 2010E to $0.70 from $1.00 for lower margin assumptions...We believe Ceradyne's premium P/E and cash flow valuation metrics will make relative outperformance difficult."

To see more analyst ratings on CRDN Click Here.

Ceradyne, Inc. engages in the development, manufacture, and marketing of technical ceramic products, ceramic powders, and components for defense, industrial, automotive/diesel, and commercial applications in the United States and internationally.

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