February 6, 2008

Metalico Rocks

No, its not a heavy metal band (sorry, I couldn't help myself). It is a small metal processor and recycling company. They were initially found on Zack's. Here is the write-up:


Metalico, a Zacks #1 Rank (Strong Buy), is a ferrous and non-ferrous scrap metal processor headquartered in New Jersey and operating in New York, New Jersey, Pennsylvania and Ohio. The company has scrap metal recycling facilities in the Great Lakes, serving the U.S. and Canadian markets.

Refractory metals, such as molybdenum, tungsten and tantalum, are recycled at the central Pennsylvania facility.

In Newark, New Jersey, the company processes used catalytic converters and recycles platinum, palladium, rhodium, known as platinum group metals. The metal is purchased from various sources including manufacturers, small scrap dealers, demolition contractors, and peddlers. The scrap is then sorted and sold to mills, furnaces and foundries.

MEA is also the nation's largest fabricator of lead based products. Some of MEA's lead raw material comes from recycling operations, where nearly six million pounds of scrap lead, including auto and truck batteries, are recycled annually.

Metalico takes being "green" seriously. For three years, the company has purchased up to 50 percent of its electricity from renewable wind energy for its corporate offices and several of its facilities.

Recently, Metalico has been growing through acquisitions.

On Jan 29, the company closed on two previously announced purchases of American CatCon, LLC and American CatCon Holdings LLC's two catalytic converter recycling facilities located in Texas and Mississippi. The facilities recover platinum group metals from scrap ceramic and metallic substrate automotive catalytic converters.

Even before the acquisitions, the company was hitting on all cylinders. MEA reported record third-quarter earnings, surprising on estimates by 21.43%. Net income increased 130% year over year, coming in at $5.3 million or 17 cents per share versus $2.3 million or nine cents per share.

Sales for the third quarter nearly doubled year over year. Sales hit a new company record of $102.1 million versus $55.4 million for the third-quarter 2006. Fourth-quarter earnings are due Apr 2.

There are only two brokerage analysts covering the company. One of the analysts is optimistic about MEA's future, raising estimates for 2008 in the last 30 days by one cent to 74 cents from 73 cents.

The company has been outperforming in recent quarters. It has a trailing 12 month ROE of 17.77%. Its price to book is 2.76 and its P/E is a solid 14.27. Metalico's growing as metal prices are high; a good combination in the metal recycling sector."

CAPS has the stock rated favorably also

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