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Three Metal Stocks to Watch

NEW YORK ( TheStreet) -- Gerdau (GGB - Get Report), Olympic Steel (GGB - Get Report), and Metalico (MEA) are scheduled to announce second-quarter results today.

Steel makers Gerdau and Olympic are expected to report revenue increases compared to the first quarter of 2010, while scrap metal recycler Metalico could post a quarter-over-quarter decline in revenues due to the pullback in domestic ferrous scrap prices.

Gerdau, a Brazilian steel producer, is set to benefit from the robust Brazilian economy realizing higher revenues in the second quarter. The company's sales for the period are forecast to increase 13.2% quarter-over-quarter and 25.7% year-over-year.

However, for the second half of 2010, Gerdau will likely witness lower volumes and higher costs in the domestic market. Brazil's second largest steel producer, Usinas Siderurgicas de Minas has already been downgraded to "neutral" from "buy" at Banco BTG Pactual last week due to the company's greater exposure to the Brazilian markets.

Olympic steel is a leading U.S.-based steel service center focused on direct sales and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheets, and plate steel products. The company is anticipated to have benefited from the higher utilization rates of 70.8% to 74.6% for U.S. steel mills during the second quarter, in comparison to the first quarter's range of 61.5% to 71.7%, as reported by the American Iron and Steel Institute (AISI).

The company is set to post earnings of 38 cents per share compared to 16 cents per share and negative $3.11 per share during the first quarter of 2010 and second quarter of 2009 respectively, according to analysts polled by Bloomberg.

Sales for the period are expected at $200.6 million compared to $122.4 million a year earlier, and $167.9 million a quarter ago. Meanwhile, EBITDA for the quarter is expected at $10.3 million from $6.8 million a quarter ago, and $0.3 million a year ago. These numbers indicate that although sales are expected to increase only by 19.4%, EBITDA is anticipated to zoom 52.6% quarter-over-quarter.

Metalico, a leading recycler of ferrous metals, is expected to report a 6.8% decline in sales during the second quarter. Meanwhile, earnings are expected at 12 cents per share compared to 8 cents per share during the first quarter of 2010, and negative 6 cents per share during the second quarter of 2009.

The decline in sales in the second quarter is attributed to lower unit shipments and decline in commodity prices. The highly cyclical nature of the scrap metal industry could impact sales in the second quarter.

Metalico has four buy, no hold and no sell ratings, as per TheStreet's Analyst ratings guide. While Gerdau has two buy, three hold and no sell ratings, Olympic steel has two buy, four hold and no sell ratings.
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