Wachovia Downgrades Ceradyne (CRDN) to Underperform; Reduces Estimates

June 10, 2009 8:00 AM EDT

Wachovia downgrades Ceradyne, Inc. (Nasdaq: CRDN) from Market Perform to Underperform. Valuation Range: $15 to $16.

Wachovia analyst says, "We are downgrading our investment rating on shares of CRDN to Underperform, as the stock's valuation appears to ignore the significant earnings risk heading into 2010. Most notably, we believe there is genuine risk that the X-SAPI body armor business could end with the 2009 procurement. Also, non-defense (industrial/automotive) sales volume may not return to 2008 levels if the global economic recovery is only a modest one. The company's "long-term opportunities" probably will generate minimal offsetting EPS over the next year...We are lowering 2009E EPS to $0.70 from $1.50. For 2010, we recognize there are significant uncertainties and (for now) are lowering our EPS forecast to $1.20 (Street: $1.58, range: $1.31-$1.85) from $1.50 driven by a 25% y/y reduction in body armor sales with lower margins. If the worst-case scenario plays out there could be significant downside risk to our Street-low $1.20 forecast."

Ceradyne, Inc. develops, manufactures and markets advanced technical ceramic products, ceramic powders and components for defense, industrial, automotive/diesel and commercial applications.

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