HAWK A (NASDAQ:HWK)

Added to the GeoSpecial list on May 10, 2010 @ $21.85

Catalyst: Offered upside due to P/E ratio valuation gap.

Peak performance: Reached a high of $26.18 on June 25, 2010.
Current Price: $25.99

Removing from GeoSpecial list. Stock has attained a trailing P/E of 25. Investors who are comfortable applying a P/E of 25 on 2010 EPS analyst estimates of $1.57 would accept a price target of $39.25.

CLEVELAND, OH--(Marketwire - June 23, 2010) -  Hawk Corporation announced today that it is raising its guidance for 2010 net sales and operating income based on the expected strength of its second quarter results and an improved outlook for the second half of the year.

The outlook for the construction and mining and heavy truck markets continues to improve, and the strength in these categories is influencing the Company's revised guidance. Hawk is increasing its guidance for 2010 full year net sales to a range of between $225.0 million to $232.0 million from its previous guidance range of between $200.0 million to $210.0 million. This new guidance represents an increase of between 30.5% and 34.6% over 2009 revenues of $172.4 million.

Based on the impact of these higher sales volumes, Hawk is also increasing its guidance for 2010 full year operating income to a range of between $32.0 million and $35.0 million from its previous guidance of between $23.0 million and $25.0 million. This new guidance range represents an increase of between 91.6% and 109.6% over 2009 operating income of $16.7 million.

Ronald E. Weinberg, Hawk's Chairman and CEO, said, "The volatility that persisted in the global economy in 2009 is giving way to more certainty that our first quarter results are sustainable. We believe that Hawk is benefiting from the improving global economy, and we see specific strength in our construction and mining and heavy truck end markets. In addition, because we continued to focus on key initiatives throughout the downturn, we have emerged strengthened and find that our business strategies are beginning to lead to increased revenue."

The Company is revising its guidance for depreciation and amortization expense to approximately $8.0 million from its previous guidance of approximately $8.5 million and capital spending for 2010 to a range of between $7.0 million and $9.0 million from its previous guidance of between $8.0 million and $10.0 million. Additionally, Hawk is lowering its effective worldwide tax rate guidance to approximately 35.0% from its previous guidance of approximately 36.0%.

Management has not scheduled a conference call in conjunction with this revised guidance. The second quarter ends shortly and additional information will be available when the Company reports its financial results in August.

Forward-Looking Statements
This press release includes forward-looking statements concerning sales, operating earnings, depreciation and amortization expense, capital expenditures and effective tax rates. These forward-looking statements are based upon management's expectations and beliefs concerning future events. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company and which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to the Company's ability to execute its business plan to meet its sales, operating income, cash flow and capital expenditure guidance and other risks detailed in Hawk's filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2009, its quarterly reports on Form 10-Q, and other periodic filings.

Actual results and events may differ significantly from those projected in the forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

HWK crushed estimates by 95.7% when it reported 2010 first quarter EPS of $0.45 on May 4, 2010. The stock has finally reacted to this news this morning. EPS is expected to grow 37% to $1.03 in 2010 followed by 45.6% in 2011. We are banking that the stock can now attain a P/E multiple of 25. Also encouraging is that HWK is buying back stock even as the stock nears its 52 week High.  Please note that the company will face a challenging EPS comparison in its third quarter after an easy comparison during the upcoming second quarter.

During the first quarter of 2010, the Company experienced strength in virtually all of its markets. Sales volumes increased as overall demand improved and multinational customers replenished inventory levels during the quarter. Based on the Company's first quarter results and its view for the balance of the year, the Company is increasing its guidance range for 2010 net sales to between $200.0 million and $210.0 million from its prior guidance range of between $190.0 million and $200.0 million. This new guidance range represents an increase of between 16.0% and 21.8% over 2009 revenues of $172.4 million.

Mr. Weinberg said, "While we judge the signs of the economy and our business to be favorable, we are raising our guidance with some degree of caution. The global economies have benefitted from enormous stimulus programs from governments and from a very supportive monetary environment, and the assumptions that these conditions will continue underlie our view for the balance of the year. Nevertheless, we have positioned ourselves to benefit from the improved economy and have launched a number of solid growth initiatives over the last year and one-half."

On February 19, 2010, the Company's Board of Directors approved a new plan to repurchase up to $25.0 million of its shares of Class A common stock in the open market, through privately negotiated transactions or otherwise in accordance with securities laws and regulations. The new plan is subject to the provisions of the senior note indenture and supplemental indenture and the Company's credit facility. Through March 31, 2010, the Company purchased $3.6 million of its common stock under the new plan.