First Albany comments on Brush Engineered Materials (NYSE:BW), bringing their Q2 EPS estimate down to $0.40 from $0.45. Firm's channel checks at perpendicular media customers indicate no meaningful ramp in ruthenium demand through the end of 2Q. Additionally, while the inventory situation on the cellular phone side appears to be improving, commentary for 2Q remains conservative.
Ruthenium prices have declined significantly (more than 50%) after peaking in February 2007. They believe this should allay some concerns about the long-term application of this material in perpendicular media. In the near term, the firm expects this price decline to reduce the one-time gain from the sale of Brush's inventory.
Prior to the preannouncement, First Albany had recommended that clients should take any weakness in the stock until the reporting of 2Q results as a buying opportunity, as they were expecting below-consensus 2Q results. With the negative news out, the firm believes the stock is now poised to move up, given their expectation of a strong second half. Maintains Buy and $63 target.
Notablecalls: I highlighted BW as an actionable bounce candidate on June 21. The stock has appreciated nicely since then. While FA's comments may create a pullback in the stock today, I continue to be positive on BW in the medium term.