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Northwest Pipe(NWPX Quote) is a North American manufacturer of large-diameter, high-pressure steel pipeline systems for use in water infrastructure applications, primarily related to drinking water systems, as well as for hydroelectric power systems, wastewater systems and other applications.

We have rated Northwest Pipe Company a buy since July 2006. The company's strengths can be seen in multiple areas, such as its compelling growth in revenue, net income and earnings per share, solid stock price performance, and largely solid financial position with reasonable debt levels.

On July 23, the company reported that its earnings for the second quarter of fiscal year 2008 jumped 48.3% from the same quarter of fiscal 2007. Northwest Pipe reported revenue growth of 10.0% year over year to $112.11 million from $101.90 million. Net income grew to $8.40 million or 90 cents per share in the quarter, from $5.66 million or 61 cents per share in the second quarter of fiscal 2007.

The company's backlog at the end of the quarter was at an all-time high of $264.00 million, and according to management, the market continues to look very active over the balance of 2008. Management continues to expect the second half of the year to be very strong on the basis of the company's backlog and current manufacturing schedules, and expects the water transmission group's production and revenue to be somewhat better in the second half of the year.

Additionally, management expects the gross margin percentage in this group to stay at about the same level as the most recently reported quarter. However, management cited the current condition of the economy and rising steel and fuel costs as risk factors going forward and said it believes steel and fuel costs are likely to remain at elevated levels but unlikely to increase significantly over the next several months. While the company does not expect any significant downturns in the segments it serves, changes in the aforementioned assumptions could negatively affect its results.