Metalico, Inc. (MEA), the scrap metal processor with 20 recycling facilities across the United States, reported the strongest quarter in the company’s history as soaring metal prices hiked revenues by 342%.

The company, a Zacks #1 Rank (Strong Buy), operates in two segments: ferrous and non-ferrous scrap metal recycling and lead fabrication.

It is the scrap metal recycling segment which is spurring the company’s growth. In the second quarter, volumes rose 185% for ferrous and 93% for non-ferrous metals year-over-year.

Prices have skyrocketed. In the second quarter, ferrous metal prices increased 126% and non-ferrous soared 215% quarter-over-quarter. The largest source of non-ferrous revenue in the quarter was in the Platinum Group Metals (PGM).

Metalico Cautions About The Third Quarter

MEA obviously operates in the highly volatile commodities sector and is susceptible to price fluctuations. For the third quarter, the company expects ferrous metal pricing to remain near record levels with both international and domestic demand expected to remain strong but pricing has been volatile in recent days.

The company said at the end of July that non-ferrous prices were settling into a trading range lower than that of the first half. It expects sluggish third quarter pricing for stainless steel and copper and steady prices for aluminum.

Platinum Group Metal prices are off their record levels in the first part of the third quarter, but the company believes they’ll settle into a narrow, but lower, trading range.

Metalico is still in an expansionist mode. It hopes to complete at least one more acquisition before the end of 2008.

Consensus Estimates Rising for the Year

As would be expected coming off the best quarter in the company’s history, covering analysts have been raising estimates for both the third quarter and the full year. For the third quarter, consensus estimates are up 2 cents in the last 30 days to 33 cents from 31 cents per share.

For the full year, estimates have jumped 12 cents to $1.22 from $1.10 in the last month

Additionally, analysts expect sales to grow 55.42% year-over-year.

Solid Fundamentals

Metalico has surprised on estimates 3 out of the last 4 quarters by an average of 30.46%. It has an excellent one year return on equity (ROE) of 22.09%. MEA’s forward P/E is only 9.54.

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