Exide Technologies: Post-Earnings, A Great Buying Opportunity

| About: Exide Technologies (XIDEQ)

Yesterday, the stock of Exide Technologies (XIDE) took a beating because its fourth quarter loss of $0.18 per share was way under street expectations of $0.25 per share in earnings. Yesterday's close of $7.35 per share was down 25% from the May 31 close of $9.86. While the street reacted negatively to the headline numbers, my review of the details left me with a very bullish outlook.

The first key point in Exide's fourth quarter report was a $10.8 million "loss on early extinguishment of debt." This loss was an accounting entry that arose from Exide's refinancing of several debt facilities on terms that will cut its future interest expenses by roughly $5 million per year. While the street viewed the loss as a bad thing, I view it as a very positive event for future earnings.

The second key point in Exide's fourth quarter report was a $25 million increase in restructuring and asset impairment charges as compared with the prior quarter. Over the last five years, Exide's restructuring charges have been as follows:

2007 $43.1 million
2008 $10.3 million
2009 $75.0 million
2010 $80.6 million
2011 $42.3 million

In their conference call, Exide advised that their expected 2012 restructuring costs will be in the $8 to $10 million range, and their anticipated operating income will be in the $160 to $170 million range, as compared to operating income of $96 million in 2011.

At yesterday's close, Exide had a market capitalization of $570 million. If their operating income guidance proves accurate, 2012 pre-tax income will probably be in the $100 million range. Since comparable major battery manufacturers trade at roughly 15 times earnings, Exide could easily see market price gains of 100% over the next year as it achieves valuation parity with its peers.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.