(March 9, 2011)

(Reuters) - Ceradyne Inc (CRDN.O), a maker of ballistic armor, diesel engine parts and industrial bearings, raised its 2011 outlook as strong pricing and higher volumes boosted its gross margins, sending its shares up 16 percent before the bell.

For the year, the company expects earnings of $2.35-$2.70 per share, on revenue of $505 million-$560 million.

Costa Mesa, California-based Ceradyne had previously forecast earnings of $1.50-$1.90 a share, on revenue of $470 million-$540 million.

"We are experiencing increasing gross margins. We believe this is due to higher volume efficiencies, an improved sales mix, as well as firmer pricing in our industrial and commercial markets," Chief Executive Joel Moskowitz said in a statement.

Ceradyne in 2010 reduced reliance on defense segment, its third largest in terms of revenue contribution, but said higher sales of solar products and a turnaround in its industrial ceramic business helped it to offset any impact.

Ceradyne shares, which have gained 32 percent in value in the last three months, rose to $44.99 in trading before the bell. They closed at $38.85 on Tuesday on Nasdaq.

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