Hardinge joins key index, highlighting its rebound

ELMIRA — Hardinge, Inc.’s recent inclusion in the Russell 2000 Index of U.S. stocks is not only a nice feather in the manufacturer’s cap, but also further evidence that the company is rebounding strongly from the recession, according to one investor.

“The Russell 2000 is certainly beneficial” for the company because it is an index of the strongest companies with the strongest balance sheets,” says Brian Rafn, principal, director of research management, and portfolio manager at Milwaukee, Wisc.–based Morgan Dempsey Capital Management, LLC. “It’s not going to be some index of $2 has-beens,” he notes of the index.

The Russell 2000 Index (ticker: ^RUT) is a widely followed benchmark of small-capitalization stocks. The index “is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set,” Russell Investments, which created the index, says on its website.  

Hardinge announced June 25 it was named to the Russell 2000, a subset of the Russell 3000 Index, a listing of the largest 3,000 U.S. stocks as of the end of May, ranked by total market capitalization. The largest 1,000 companies become the Russell 1000 and the next 2,000 companies become the Russell 2000. The median market capitalization of companies in the Russell 2000 was almost $460 million, with market caps ranging from a low of $101 million to a high of $2.6 billion, as of May 31, according to Russell Investments. Hardinge’s market cap was $101 million, as of midday June 28, with a stock price of $8.66.

Just two years ago, Hardinge started off 2010 with a first-quarter net loss of $5.19 million, or a loss of 45 cents per share, on sales of $43.2 million.

The machine-tool industry suffered mightily during the recession, with sales dropping off about 70 percent, Rafn says. “The machine-tool industry was the worst on the planet. It was like shutting the light off in that industry.”

With orders down, no one expected Hardinge to turn a profit during those years, Rafn notes. The company’s stock price bottomed at $2.60 in early March 2009. But the strength with which the company has rebounded since then is a testament to the company’s management, quality products, and solid reputation, he explains.

Hardinge produced net income of $2.4 million, or 21 cents per share, on net sales of $74.7 million during the first quarter of 2012, compared with net income of $1.1 million, or 12 cents, on net sales of $91.1 million in 2011. 

“They have been a phenomenal company,” Rafn says. His money-management firm has owned Hardinge stock since the early 1990s, he says. Morgan Dempsey Capital Management owned 65,278 shares of Hardinge, as of March 31, 2012, according to a filing with the SEC.

Hardinge officials hope that joining the Russell index will provide some positive benefits. “We expect our inclusion in the Russell 2000 will help to create greater visibility for Hardinge in the investment community,” Hardinge Chairman, President, and CEO Richard Simons said in a news release. “We welcome the opportunity to educate a broader audience on our strategy to leverage
our strong brands to capture greater global market share, while we focus on driving cash generation.”

Many small-cap mutual funds and exchange-traded funds either track the Russell 2000 Index or use it as a benchmark.

Headquartered in Elmira, Hardinge (www.hardingeus.com) manufactures machine tools for the aerospace, agricultural, transportation, consumer-goods, communications, electronics, construction, defense, energy, pharmaceutical and medical-equipment, and recreation industries. The company employs about 400 people at its Elmira facility. Hardinge also operates plants in Switzerland, Taiwan, and China.