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CASTLE: WATCHING FOR THE SIEGE TO END

To its dismay, A.M. Castle (CAS) has discovered that an impressive customer list is no guarantee the stock won't go south. Castle's blue-chip buyers include Boeing, Raytheon, DuPont, and Beechcraft. But when Castle's earnings growth showed signs of slowing, big and small investors bailed out, causing the stock to drop to 16. In September, it had traded at 26.

No matter, says David MacGregor of Midwest Research Maxus Group in Cleveland, who thinks investors looking for a company with a ''solid'' balance sheet and a shareholder-oriented management, will ''rediscover'' Castle. He thinks Castle, a major distributor of specialty metals, ''is worth 25.''

''The company's on track to snap back,'' says MacGregor, although he admits it won't be easy to match Castle's stunning earnings growth in the past: 103% in 1993 and 120% in 1994. In 1995, growth was down to 73%. For 1996, MacGregor foresees a puny 3%.

Castle is trying to become a more service-oriented company. It provides a variety of metals in relatively small quantities, often pre-cut or pre-shaped, for use in customers' production processes. Castle uses a computer system that gives customers just-in-time inventory management, which prevents overstocking and so helps reduce costs.

Management, which owns 40% of the company, is focusing on improving operating margins and making the business less exposed to the economic cycle, says MacGregor. He expects Castle to make $2.30 a share in 1997, up from an estimated $2 in 1996.

BY GENE G. MARCIAL


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Updated June 13, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.
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