C&D Technologies Poised to Power Ahead

| About: C&D Technologies (CHP)

I’ve been highlighting green technology and alternative energy sources in my recent blogs. While C&D Technologies (CHP) is not officially a green-tech stock, it is a company that exists to support failing electrical systems, which with this summer’s heat wave, many of us are all too familiar with.

Together with its subsidiaries, C&D manufactures and markets electrical power storage and conversion systems, including industrial batteries and electronics. It is a market leader in reserve power systems, electronic power supplies and material handling systems through 3 divisions (the Standby Power division, that makes and markets standby power; the Motive Power division that manufactures and markets lead acid batteries and systems used to power, charge, and test the batteries; and the Power Electronics division, providing electronic power supply systems and conversion products). Based in Pennsylvania, the company was founded in 1985 and sells its products primarily in Europe, China, Mexico, North America, and Asia.

Approximately 70% of the company's current sales are reserve power systems supplied to leading operators of telecom, data transmission, infrastructure computer systems and utilities so that if the power goes out, these vital systems can stay up and running. You can imagine how the rising temperatures in the globe will continue to put heavy demand on our power systems, and this is why C&D with its reserve power systems is a company with a future.

Its first quarter results for ’06 came in with a net loss of $8.7 million, or 34 cents per diluted share, on revenues of $129.2 million. Part of the loss was due to having to spend $1.7 million to remove hazardous substances in response to new EU mandates. The rising costs of copper, resins, steel and fuel, all used in their products, have also negatively impacted this company.

With commodity prices still going up, this will continue to cut into profits. However, C&D announced on July 19th that it is now in compliance with the EU hazardous waste mandates, and I don’t see demand for its products letting up any time soon.

Type of stock:
A manufacturer and marketer of electrical power storage and conversion systems, this (small) $140 million market cap company specializes in power reserve supply systems.

Price target: This is an opportunity stock that has been hit hard in the short term by rising commodities prices and one-time compliance requirements for international regulations. The stock reached $11 within the last 52 weeks. A poor first-quarter report took its toll, and the price is now floating in the $7.00 to $7.50 range. I think it is worth picking up now and watching as rising demand in the electricity world causes more power failures and rising demand for C&D power systems.