Ceradyne (CRDN): Downgraded after a stealthy warning

From Notable Calls

Stanford is out downgrading Ceradyne (NASDAQ: CRDN) to Hold from Buy after the co lowered its FY08 and FY09 guidance at an investor conference yesterday after the market close. The company reduced its FY09 sales guidance from $640-650 million to $600 million and EPS guidance from $3-3.25 to $2.30 due to pricing pressure in solar, XSAPI body armor delay, and weakening demand for its industrial business.

Firm lowers FY09 sales and EPS estimates to $596M and $2.29. They believe there is still downside risk to management’s new guidance due to uncertainty from the XSAPI rebid after BAE Systems (BAESY, Not Rated) withdrew its protest. According to sources, the Army is considering splitting the XSAPI business more evenly amongst the winners, which means Ceradyne could end up with less than the previously awarded 64% market share. In addition, management assumes it maintains the 75% market share on the new side plates (ESBI), but the scope and timing remains uncertain.

They downgrade Ceradyne to a HOLD and reduce price target from $23 to $18 based on new estimates.

Notablecalls: What's so great about this dg? Well, there is no PR out on this warning. Short at will. This baby will go down hard. I'm guessing $21-$22 range. And don't cover until the PR.

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PS: Now hearing Stephens out saying CRDN will trade below $22 in their opinion.

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