Elcor (ELK ) is a two-trick pony. Its Cybershield unit--which makes coatings for cell phones that reduce the electromagnetic pulses close to users' heads--was all the rage during the telecom boom. But the stock plunged by half in May, following a warning that fiscal 2000 and 2001 earnings wouldn't meet forecasts.
Luckily, that's only a small piece of the Dallas company's business. Elcor also makes shingles for roofing and coatings for engine parts, and those operations are flourishing. Elcor recently announced that earnings would beat analysts' estimates: The company expects 27 cents to 32 cents per share for its first quarter, 2002, ended Sept. 30, vs. the consensus 19 cents. The stock, trading at 21, is up 27% so far this year. A new $75 million factory in Meyerstown, Pa., will serve a growing Northeast market, says John Kasprzak of BB&T Capital Markets in Richmond, Va. "Further upside surprises are likely, and that's what's going to drive the stock higher," he says.
Kasprzak had initially predicted that the new plant would be profitable by June, 2002--but it is already in the money. He says it will ultimately contribute more than $2 a share to yearly earnings. In the meantime, he has raised estimates for fiscal 2002 to $1 a share, up from 45 cents in 2001. Falling prices for oil, a big production cost, will help, he adds. Dwain Carryl at equity-researcher Sidoti in New York, who rates Elcor a "buy," sees the stock hitting 28 in a year.
By Mara Der Hovanesian