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Why DMC Global Stock Just Popped 10.5%

By Rich Smith - Oct 23, 2020 at 12:39PM

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The industrial company beat earnings in Q3 -- and promised to do it again in Q4.

What happened

DMC Global ( BOOM 3.49% ) has a fun ticker symbol. The reason it does is because of the business it's in: welding together metal plates through the heat and pressure created by explosions -- primarily for use in the oil and gas industry.

DMC Global investors are having a pretty fun day, too, as they watch their shares explode higher -- up 10.5% in 11:50 a.m. EDT trading -- after the company reported blowout earnings last night. Instead of the $0.09 per-share loss that Wall Street was expecting, DMC reported  an $0.08 per-share profit.

Glowing green stock arrow climbs up on a stock screen.

Image source: Getty Images.

So what

Not all the news was great. Fact is, DMC Global beat expectations by reporting $55.3 million in sales for the quarter, versus the $46.5 million that analysts had predicted, but these sales were still down 45% year over year.

Gross profits also declined, down 36%, as did operating profits, down 88%. And even DMC's net earnings of $0.08 was a pro forma number. When calculated according to generally accepted accounting principles (GAAP), DMC earned $0.07 per share.

Now what

But even so, things weren't nearly as bad as Wall Street feared in Q3 -- and Q4 could be even better. Giving new guidance for the year's final quarter, DMC CFO Michael Kuta predicted that sales will range from $50 million to $55 million. At the top of that range, those sales could be back to almost flat against year-ago sales. And with Wall Street still forecasting Q4 sales of only $49.4 million, DMC all but guaranteed that it will "beat earnings" this current Q4.

Coming on top of a Q3 that was already a blowout, it's no wonder investors are happy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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