ZEUS - Olympic Steel - Consensus Estimates Are Rising for the Second Quarter and 2008

Olympic Steel capitalized on rising commodity prices and strong demand for processed steel to post record first-quarter earnings results. The company beat Wall Street estimates by 24.74%. Olympic Steel has a forward P/E of 13.28.

Full Analysis

Olympic Steel Inc. (ZEUS) distributes processed carbon, coated and stainless flat-rolled sheet, and coil and plate steel products in the United States. The company operates as an intermediary between steel producers and manufacturers that require processed steel for their operations. ZEUS operates 15 facilities across North America, predominantly in the Midwest.

Olympic Steel continues to expand its regional reach. On Apr 18, ZEUS announced it was constructing a new facility in Sumter, S.C. which will be completed by the end of 2008. It joins the company's North Carolina operations which were acquired in 2006. The 100,000 square foot facility will cost $10 million and will expand the company's processing capabilities in the Southeast region.

Olympic Steel Reports Record First-Quarter Earnings

On Apr 30, Olympic Steel reported its first-quarter earnings and easily beat Wall Street estimates by 24.74%, or 24 cents a share. Net income was $13.2 million, or $1.21 per share, compared to $5.3 million, or 49 cents per share, in the year ago period. Analysts expected 97 cents. Net sales increased 6% to $274.9 million from $259.4 million in 2007.

Optimistic about the Rest of 2008

The company is optimistic going forward due to strong global steel demand and a weak U.S. currency, and historically low levels of service center inventory. ZEUS acknowledges it faces challenges from rising energy and raw material costs.

"As steel prices continue to escalate and availability of short-term credit tightens through the second quarter, our approach to the market will continue to be guided by our core values of integrity, respect and financial stability. We believe we are appropriately positioned in terms of inventory, value-add processing capabilities, and liquidity to continue performing well through the higher-priced and seasonally stronger second quarter," said Chairman and Chief Executive Officer Michael D. Siegal.

Olympic Steel has allocated $40 million for capital investment in 2008.

Consensus Estimates Are Rising for the Second Quarter and 2008

Consensus estimates for the second quarter are up 24 cents in the last 60 days to $1.40 from $1.16 per share. For the full year, consensus estimates rose 36 cents to $4.00 from $3.64 per share.

Olympic Steel's forward P/E is 13.28. Its price-to-book is 2.08. The company has an outstanding five year average return on equity (ROE) of 15.62%. ZEUS has a dividend yield of 0.32%.

Content Courtesy: Zacks Investment Research

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