Shares of Dynamic Materials Corp. plummeted Friday as a JPMorgan analyst downgraded shares of the industrial metalworking company, saying rising steel prices and lack of pricing power threaten to erode earnings.
Michael F. Gambardella downgraded Dynamic Materials to "Neutral" from "Overweight" in a note to investors on Friday, a day after the Boulder, Colo.-based company said its first-quarter profit climbed 7.4 percent but issued disappointing guidance.
Gambardella said the company's earnings beat his estimates, but he was not optimistic on its future performance.
"We believe the earnings outlook for Dynamic Materials has become less clear, as rapidly rising steel costs and tight steel supplies increase the risk of margin contraction and potential order delays," Gambardella said.
The analyst cut his 2008 profit forecast to $2.10 per share from $2.40 per share. Analysts polled by Thomson Financial expect a profit of $2.36 per share.
On Thursday, the company said it expects a second-quarter profit and sales in line with first-quarter results _ or 42 cents per share on $58.4 million in sales.
Wall Street expects second-quarter earnings of 56 cents per share on $63.6 million in sales.
Shares of Dynamic Materials fell $10.23, or 22 percent, to $36.36 in afternoon trading. The stock has ranged from $32.63 to $66.30 over the past year.
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