Baird Likely Underestimating Bucyrus's Profitability Potential

Baird is out with some good comments on Bucyrus (BUCY) following Q1 results announced yesterday.

According to the firm, impressive margin performance drove 1Q08 EPS $0.28 (29%) above consensus and both new machine and after-market orders were exceptional. While 1Q revenue was only in line with their estimate (and below consensus), strong order intake creates greater visibility of sustained growth potential, and the substantial upside to their 1Q margin estimates suggests they may be materially underestimating Bucyrus's profitability potential.

Order growth surges. 1Q08 orders increased 58% sequentially (following a 108% sequential increase last quarter) to $1,093 million, well above the $565 million of orders incorporated in Baird's model. 1Q08 consolidated N12M backlog stood at $2.07 billion, up 40% sequentially.

While Baird currently maintains their Outperform rating and $130 target, they expect their EPS estimates and price target to move higher after management's conference call (8:00 a.m. CDT).

Notablecalls: I suspect Baird's target on BUCY goes to around $140+ following the conference call. This will make the stock look cheap again and will provide another push over the $120 level. It's all about orders and orders sure were up strong. The slight miss on the revenue side doesn't mean much. It's all about orders. Buying BUCY around $115 (offered pre-market) will likely lead to profits.

Comments

[Gunslinger]

Good CALL!