What Happened to Brush Engineered?

T

techmann

Brush Materials (BW) posted a 1Q EPS of $1.12 today before market open. The consensus estimate was only 73 cents. So this company beats the Street's estimate by over 53%. What happens to the price of the stock. It's down over 16% as I am writing this! Can someone please explain how this can happen? Prior to the opening the P/E of the stock was 24 which is slightly high (relative to industry and S&P) but not what I would call excessive. I’m aware that forward guidance trumps earnings but forward guidance was positive with 2007 sales growth given as 25-35% growth. Again, not too shabby.

Obviously, there must be some other valuation model being used by investors to determine the fair value of the stock so even with an EPS of $1.12, this model calculated the new share price to be roughly 16% less than what the stock was previously worth. Can someone explain how this model really works and what investors really look for? Thanks.

T.C.
 
Quote from techmann:

Can someone please explain how this can happen?
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Yes, there is more supply than demand for the stock. Hence price goes lower. If the disparity is large the price can drop fast quickly. Forget numbers, forget earnings. Short term, they mean nothing. It's all about bid and ask.
 
From what I've gathered, they had a huge unexpected expense. I've read some reports saying 2007 was going to be very strong, others saying Q2 guidance came in low. Then I've heard all fundamentals are strong and blablabla.

Needless to say the stock found support at the 50MA where it's found support before. I bought in at $51.90 and I'm waiting for tonights CC to see what's up. I'm a little dissapointed that they released numbers then made everyone wait until the end of the day to hear whats going on.

Around 12:00 - 12:15 ET volume surged on the stock, and it bounced all over the place. So obviously someone is buying/selling. It almost seems like a classic manipulation case, but who knows.
 
It's funny you mentioned manipulation. The stock traded only a few seconds at the start of the market and then all trading was suspended on it for about the next 20 minutes. It's almost as if they needed the time to figure out how the whole thing was going to play out. I agree that the 50-day MA is probably a good enough support and at this point I would think that most of the weak sellers of the stock have been shaken out. It wouldn't surprise me to see it make some decent headway back up within the next week.

T.C.
 
Quote from Hydroblunt:

Oh yeah, total manipulation

http://biz.yahoo.com/ap/070426/brush_outlook.html?.v=1

Before you go to trade earnings, make sure you take the time to understand how hedge funds, mutual funds & pension funds base their buy & sell decisions.

Here is a hint:

Guidance holds much more weight than the actual earnings results.
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Did you take the time to notice what time that article was posted? 1:35 pm, yeah I sat in the dark all day until now, thanks.

If you listened to the conference call, there really was no reason for the huge sell off. Even analysts on the call were saying the same thing. Growth is expected to continue at an accelerating pace and they still expect $2.50 EPS.

And it wasn't an earnings trade, thanks though.
 
Its funny how Brush Engineering has the same chart pattern as a year 2000 tech stock.

BARF!!!

Actually, the attached chart is even in the same price range as BW. The charts almost look identical.

I looked at the floats. This is a small float stock and was probably used as a trading vehicle as part of the materials boom. I noticed its competitor OLN has a float of over 70 million.

So traders basically looked at the floats and chose BW as their trading vehicle versus OLN. So it looks like the traders decided to find a new vehicle.
 

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Quote from james_gsx:

Did you take the time to notice what time that article was posted?
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Haven't been trading long have you?

By the time you even realize they are releasing earnings, the traders are analyzing guidance. Which was out early: http://biz.yahoo.com/bw/070426/20070426005706.html?.v=1

The company is not meeting growth expectations, hence, such selling.

P.S. I'm using Yahoo just to source the news. The real sellers use a prime news service, which hits them way before you get your news.
 
Just by looking at the price move and by knowing it's not a penny stock you can gather it's some news/buyout/earnings/bankruptcy or related major event. 1bln market cap companies rarely move 15% down on high volume without a major news driving the action.
 
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