Can anyone remember the last time ceramics specialist Ceradyne (NASDAQ:CRDN) tripped over the quarterly earnings hurdle Wall Street set up for it? I can, but I have to cheat, and check the records on Earnings.com. The answer is that it's been 18 quarters -- 4 1/2 years -- since Ceradyne let anyone down. Can these guys keep the streak alive when first-quarter 2007 numbers come out Friday?

What analysts say:

  • Buy, sell, or waffle? I find it amazing that, with its record of success, Ceradyne still has just eight analysts on Wall Street following it. I find it less amazing that a majority of these analysts rate the stock a buy, while the other three say hold.
  • Revenues. On average, they're looking for 32% sales growth, to $180.4 million.
  • Earnings. Profits are predicted to rise 47%, to $1.32 per share.

What management says:
Reviewing his firm's Q4 and full-year 2006 results back in February, CEO Joel Moskowitz pronounced himself "very pleased with our financial performance in fourth-quarter 2006 as well as the full year." As well he should be. The company increased its earnings for the full year by -- better sit down for this -- 174% on an 80% spike in revenue. Of course, those kinds of results can't be repeated forever. The fact that order backlog increased "only" 24% tells you that sales growth just has to slow down somewhat going forward -- and earnings growth with it.

What management does:
I guess it goes without saying that if the company grew its profits at more than twice the rate it grew its sales, then it must have found a way to make those sales more profitable, right? Well, just in case, Moskowitz came out and said it, boasting of a 400-basis point improvement in gross margins in last year's fourth quarter. As for the longer-term trends, you'll note in the table below that they've been up, up, and away for as long as anyone can remember.

Margins

9/05

12/05

3/06

6/06

9/06

12/06

Gross

33.9%

35.6%

37.5%

38.3%

38.5%

39.4%

Operating

20.0%

22.2%

25.3%

27.0%

28.2%

29.7%

Net

11.7%

12.7%

15.0%

16.4%

17.8%

19.4%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflect trailing-12-month performance for the quarters ended in the named months.

One Fool says:
It makes me nervous when I read over a company's earnings report and its historical numbers, run a quick valuation, and still can't find a thing to quibble with. As a confirmed skeptic and pessimist, I pride myself on being able to quibble with anything -- but with Ceradyne, I got nuthin'.

P/E-wise, the firm looks positively cheap at 13 times trailing earnings. That's less than Goodrich's (NYSE:GR) 14, General Dynamics' (NYSE:GD) 18, and Armor Holdings' (NYSE:AH) 20, yet none of these firms are expected to grow any faster than Ceradyne over the next five years.

Usually, a fast-growing business like Ceradyne's will at least have some holes in its balance sheet: tardily-paying customers who set accounts receivable to rising, or tottering piles of inventory symptomatic of a company stockpiling raw materials as fast as it can in anticipation of future demand. At Ceradyne, not even these quibbles-of-last resort exist. Against 75% sales growth in the last half of last year, A/R have risen less than 50% on average. And inventories? They're up a bare 8%. Not only is this company a fast grower, and superbly profitable -- it also exhibits sheer wizardry at managing its working capital.

I almost hope to see the company slip up on Friday, if only to give me something to write about in next quarter's Foolish Forecast.

What did we expect out of Ceradyne last quarter, and what did we get? Find out in:

Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.