Ceradyne Reassures Investors

Yesterday morning, Ceradyne (CRDN) had a conference call to provide accurate information to the marketplace as well as to give an update to current and future business ventures. Ceradyne felt that incorrect information was being let out to the marketplace in the areas of their 2007/2008 guidance as well as their body and vehicle armor contracts. The following is a summary of their conference call.

2007 - 2008 Guidance

Ceradyne reiterated their Q4 2007 and Full-Year 2008 Guidance. Their current 2008 guidance is for revenues of $780 million to $1.067 billion. The low end of the range is based on their current business units. The high end of the guidance is based on winning orders for the Bull Vehicle.

Armor Programs

Ceradyne was informed Monday they would receive a $107 million dollar release on its prior ESAPI contract to continue production until the end of May 2008.

The new ESAPI/XSAPI solicitation is due in early December. The award will be given out no later than April 1, 2008 with delivery by June 30, 2008. The 5-Year IDIQ contract fully funded is valued at 1.5 billion.

Ceradyne also mentioned it was likely to receive a significant SOCOM award. The 5-Year IDIQ contract value is in excess of 400 million.

In regards to the, Ceradyne's MRAP II Vehicle The BULL, the government is still reviewing the bid package and the decision date won't be until January, 2008. The government tested two BULL vehicles and according to Ceradyne there were no penetrations of the crew cabs of either vehicle. They are still awaiting the government report of the tests.

Ceradyne is also in negotiations with a major vehicle OEM for the first alternative LTAS light weight armor kit that will be delivered in the first quarter of next year.

Current Non-military business

Ceradyne mentioned their solar cell casting ceramic crucibles should bring in approximately $10 million 2007, $50 million in 2008, and $100 million in 2009.
This product line provides good margins and they believe this product line will be a strong one in the future.

2007 Acquistions

Ceradyne has found new proprietary use for boron isotope for applications in semiconductor area. The margins are excellent and they are only at 25% capacity.

Future Non-military business

Ceradyne is working with largest aluminm companies in the world to improve the smelting of aluminum with their ceramic technology.

Ceradyne is also working on methodology to extract high visocity oil from oil sands in Canada.

My Take on the Conference Call

It's nice to see the company do a conference call to clear up the misconceptions in the market especially since its stock price was cut in half because of many of these misconceptions.

Ceradyne's aim to diversify its revenue and client base (away from primarily military) is a good one. It's a bonus that those non-military products are high margin products.

The government report on the BULL vehicle tests will be a big catalyst for the stock. A positive report will calm down the doubters that Ceradyne won't get a portion of the MRAP II vehicle contract. A negative report will bring some doubt to the company. But with Ceradyne saying there was no damage to the vehicles, the chances of a negative report are slim.

Ceradyne's stock responded strongly yesterday finishing up $3.06 to $45.57. With some of the fear being taken out of this stock, this stock has plenty of upside in the months to come.

Disclosure: none