Despite the volatility in the shares, these are still pretty good days for specialty metal companies like OM Group
Like the first quarter, the second quarter was a strong one year over year (and certainly not bad sequentially). Revenue rose nearly 39%, and though rising metal prices and acquisitions did have a part in that, underlying organic growth was nevertheless quite solid. Though gross margins were hurt by an inability to fully recapture rising copper costs, operating income still jumped more than 50%.
The good news and bad news about the Brush Engineered story is the extent to which the consumer electronics market is a large part of recent growth. It's great that Brush is winning business in areas like disk drives from Hitachi
On the other hand, what the consumer giveth, the consumer can taketh away. It's certainly possible for companies to continue growing even in the face of overall declines in a sector or industry, but that's a tougher row to hoe. What's more, folks who've been investing for the last decade or so have seen what booms and busts in various technology-product categories can do to suppliers -- even suppliers with good products and distinctive or unique advantages.
For now, it would definitely seem that Brush Engineered has the wind at its back, not only with good consumer electronics demand, but also with strong markets like energy and commercial aerospace. I think you could also make a case that the shares are undervalued. That said, look at the volatility in some of the specialty metal stocks, or even just high-quality mundane metal companies like Nucor
For more Foolish metal mischief:
- Brushing Up on Brush Engineered Materials
- Unalloyed Growth for Allegheny
- A Dollar's Deciding Difference
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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