Ceradyne ( CRDN, a big supplier of military armor, is taking some hits itself.

The company, which looked almost bullet-proof as its stock set a record high last week, came under fire following a disappointing second-quarter update on Tuesday. Shares fell 8% in heavy midday trading, dropping $6.75 to $76.08.

Net income jumped 32% to $38.3 million, and earnings per share of $1.38 actually beat the consensus estimate by 2 cents. However, revenue of $185 million came in a bit light, and new bookings and backlog orders suffered steep declines.

Indeed, new bookings fell by more than half to just $55.3 million in the latest period. Meanwhile, backlog orders slid 21% to $202 million.

FBR Research analyst Brian Butler had anticipated a far different scenario. He predicted that Ceradyne would actually post weaker financial results but see its stock continue to rally nonetheless. In fact, he prepared investors to sell their shares -- which he views as overvalued, after last week's run to a new high -- and lock in their gains if that happened.

"While we think that fundamentals and our body armor outlook do not support the current valuation, CRDN shares continue to have very strong momentum as the company reports what should be strong 2Q results," Butler wrote on Monday. Thus, "we would take profits at these levels but would not be shorting the shares."

Butler has a market-perform rating on Ceradyne's shares, which he values at just $60 apiece due to a potential slowdown in the military armor business. His firm makes a market in the company's securities.

Still, Ceradyne's huge rally has been fueled in part by new opportunities in the military arena. Notably, Ceradyne has developed a groundbreaking vehicle that is considered an early favorite for awards under the military's newly expanded Mine-Resistant Ambush-Protected vehicle program. Ceradyne's vehicle, known as the Bull, can reportedly survive "explosively formed penetrators" that would devastate current MRAP offerings.

"Ceradyne does not currently have orders for the Bull," CEO Joel Moskowitz admitted on Tuesday. "But we believe there is substantial congressional and military interest in this unique vehicle."

Ceradyne, a newcomer to the MRAP game, will be competing against several established vehicle suppliers -- including frontrunners Force Protection ( FRPT - Get Report) and Navistar ( NAVZ -- for contracts under the new multibillion-dollar MRAP II program. Meanwhile, the company's stock has already doubled in less than a year due to its booming military business.