Tags: SCHN | Schnitzer Steel Industries | metals | industrial | stock

Schnitzer Steel Industries Enjoys Metals Boom

By    |   Friday, 03 Jun 2011 10:40 AM

Metal prices are popping. Emerging growth countries are snapping up ferrous metals (steel and pig iron) to build much-needed infrastructure, along with making consumer products. Copper, aluminum, and other nonferrous (non-iron) metals, are also seeing double-digit price hikes. Schnitzer Steel Industries (SCHN) is riding this uptick. The company has boosted its operating margins and nabbed acquisitions.

The results are surprising even Wall Street. Schnitzer Steel’s second quarter revenues rose 28 percent to $722 million versus $564 million last year. By harnessing new processes, the company’s operating income rose 61 percent, with its earnings per share gaining 77 percent in the quarter.

Its secret is mining the sweet spots. Take Schnitzer Steel’s metal recycling business, which accounts for most of its revenues. The company notched 30 percent revenue gains in both ferrous and non-ferrous recycling by selling its wares to 19 other countries. Conversely, its smaller auto parts segment revenues grew only 7 percent in the quarter.

Schnitzer Steel executives see more double-digit gains coming from recycling metals. And they’ve made three acquisitions so far this year, mostly metals recyclers, to further pump up growth.

Underpriced stock, good prospects

Despite Schnitzer Steel’s glowing numbers, Davenport analysts see the stock as a bargain, noting that it lost 17 percent of its value this year.

Analysts at Canaccord Genuity agree, pegging an $80 price target on Schnitzer Steel stock, which now trades in the mid $50 range. They cite strong scrap metal prices increases as one key driver.

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Metal prices are popping. Emerging growth countries are snapping up ferrous metals (steel and pig iron) to build much-needed infrastructure, along with making consumer products. Copper, aluminum, and other nonferrous (non-iron) metals, are also seeing double-digit price...
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2011-40-03
Friday, 03 Jun 2011 10:40 AM
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