10 Metal and Mining Stocks: Earnings Preview

NEW YORK (TheStreet) - United States Steel (X), Peabody Energy (BTU), Arch Coal (ACI) and Consol Energy (CNX) are among the 10 stocks that are scheduled to release their quarterly earnings results next week. Given the bright outlook for the steel and coal industry for 2011, these stocks are an attractive buy for investors.

According to World Steel Dynamics ( WSD), the profit outlook for global steel mills in 2011 is fair to good with production seen at 1.49 billion tonnes. For 2010, WSD estimates EBITDA of global steelmakers to recover by $47 billion after facing losses in 2009. Additionally, RNCOS expects steel consumption to grow at 4% CAGR during 2010-2012, riding on the strong demand in the U.S. automobile sector.

As for the coal industry, a Dahlman Rose analyst said coal shortages and supply disruptions are coming at a time when global world demand for these commodities is on a roll. Under these circumstances, coal stocks present a good buy opportunity. Additionally, BlackRock analyst Daniel Rice believes that the prices of coal stocks are likely to double as oil prices reach the $100 a barrel mark.

The stocks are stacked based on their earnings release date.

10. Steel Dynamics ( STLD) operates in three segments: steel operations, metals recycling and ferrous resources operations, and steel fabrication. The company is scheduled to report its fourth quarter results on Monday.

Steel Dynamics estimates earnings per diluted share before certain asset impairment charges related to its fabrication operations, in the range of 5 cents to 10 cents, compared to its reported third-quarter earnings of 9 cents per share. Meanwhile, impairment charges are seen ranging between $13 million and $15 million, or 3 cents and 4 cents per diluted share.

With a dividend yield of 2.13%, the company declared a quarterly cash dividend of 7.5 cents per share for the fourth quarter. Bedford analysts believe that since the company's capital spending has peaked, its 2011 free cash flow is likely to rise further, opening the door for a rise in dividend payouts.

Analysts polled by Bloomberg said the company is likely to report a net income of $23.1 million on $1.59 billion sales, compared to a net income of $18.74 on $1.58 billion sales in 2010 third quarter. Steel Dynamic is likely to report earnings per share of 69 cents for 2010, compared to loss of 4 cents in 2009. For 2011, earnings per share are likely to more than double to $1.51.

Of the 11 analysts covering the stock, 82% recommend a buy, while the remaining suggest a hold. There are no sell ratings on the stock. The stock has a 15.4% upside from current levels.

9. AK Steel Holding ( AKS) produces flat-rolled carbon, stainless and electrical steels and tubular products through its wholly owned subsidiary AK Steel. It has seven steelmaking and finishing plants. The company is scheduled to report its fourth quarter earnings report on Tuesday.

AK Steel expects a tough fourth quarter, chiefly because of lower shipments, softening prices and higher costs. The company expects shipments to decline sequentially by 8% to 0% to 1.3 million tones to 1.35 million tonnes. This is primarily because of higher inventory levels in the end market and a 4% drop in average selling prices due to lower spot steel prices and change in product mix. Fourth-quarter operating loss is forecasted at about $80 per tonne. However, maintenance costs are expected to drop by almost $20 million from the third quarter.

Analysts polled by Bloomberg said for the full year 2010, AKS is likely to report a net loss of $48.1 million on sales of $5.97 billion, lower than $69.5 recorded on $4.08 billion sales in 2009. Meanwhile, during 2011, the company is seen swinging to a profit of 58 cents per share on sales of $6.64 billion.

Of the 13 analysts covering the stock, 15% recommend a buy, while 61% suggest a hold. Based on the company's cost-containment efforts and reduction in funded debt and underfunded pension and health care liabilities, analysts polled by Bloomberg see a 2.7% upside from current levels. AK Steel has a dividend yield of 1.5% currently.

8. Peabody Energy is a coal company holding majority interests in 28 coal mining operations in the U.S. and Australia. It has three mining segments and one trading and brokerage segment. The company is due to publish its fourth quarter results on Tuesday.

Peabody believes that the flooding in Australia could cause a decline in 2010 earnings before interest, taxes, depreciation and amortization to the midpoint of its estimates of $1.7 billion to $1.9 billion. However, despite supply disruptions, the company reaffirms its production estimates between 35 million tonnes and 40 million tonnes from Australia by 2015. Besides, Peabody has maintained its 2010 sales target of 240 to 260 million tonnes.

Analysts polled by Bloomberg said the company is likely to report a net income of $215.8 million on sales of $1.80 billion, compared to a net income of $280.3 on sales of $1.86 billion recorded during the third quarter of 2010. Peabody is likely to report earnings per share of $2.94 during 2010, compared to $1.92 in 2009. For 2011, earnings per share are likely to surge by 63% to $4.81.

The company increased its quarterly dividend for the third quarter by 21%, claiming robust operating cash flows and strong liquidity levels. Peabody declared a quarterly cash dividend of 7.5 cents per share for the fourth quarter. According to Standard & Poor's, Peabody is likely to record a more than 16% jump in revenue during 2010 and an equivalent or higher rise in 2011.

Of the 26 analysts covering the stock, 85% recommend a buy, while 11% suggest a hold. With Peabody well positioned to meet emerging markets' rising demand, analysts polled by Bloomberg estimate a 17.7% upside from current levels.

7. United States Steel is an integrated steel producer of flat-rolled and tubular products with production operations in North America and Europe. The company is due to publish its fourth quarter results on Tuesday.

Looking ahead into the fourth quarter, the company said its flat-rolled earnings will be in line with third quarter performance. On one hand as the company estimates to incur costs for structural repairs it foresees costs to be lower by almost $40 million from the third quarter. U.S. Steel expects a stable fourth quarter as lower raw material costs and reduced spending on repairs and maintenance, compared to the third quarter, and lower shipments due to seasonal demand patterns.

Analysts polled by Bloomberg see the company reporting a net loss of $167.2 million on sales of $4.22 billion, lower than a net income of $175 million on $4.50 billion sales recorded for the 2010 third quarter. For 2010, U.S. Steel is likely to report a loss of $2.39 per share, lower than a loss of $9.78 per share reported for 2009. For 2011, the company is estimated to swing to profit with earnings of $3.29 per share.

With a dividend yield of 0.46%, the company has a consistent record of dividend payouts. For the third quarter, it paid 5 cents per share, in line with the earlier quarter. Of the 13 analysts covering the stock, 46% recommend a buy while the remaining 38% suggest a hold. The stock has a 10% upside from current levels as per analysts' consensus estimates of 12-month target price.

6. Carpenter Technology ( CRS) manufactures, fabricates and distributes specialty metals. It primary operates in two main segments: Advanced Metals Operations and Premium Alloys Operations. The company is due to release its results for the second quarter ending Dec. 31, 2010 on Tuesday.

The company estimates overall revenue for 2011 growing in the mid- to high-teens, despite seasonally lower volumes in first half of the year. Carpenter Technology says profitability is improving due to volume growth, a better product mix and ongoing cost-containment efforts. Moreover, the recent acquisition of Amega West Services, a drilling equipment company, will not only provide an opportunity to sell specialty alloys in the oil and gas market, but also generate modest earnings in 2011.

The company is likely to report a net income of $11.75 million on sales of $364.2 million, compared to a net income of $8 million on sales of $336.9 million in the third quarter of 2010, according to analysts polled by Bloomberg. For the quarter, Carpenter is likely to report earnings of 26 cents per share, compared to earnings of 18 cents in the third quarter. Moreover, for 2011, earnings per share are likely to multiply to $1.34, against 30 cents in 2010.

With a dividend yield of 2.14%, the company recently declared a quarterly cash dividend of 18 cents per share. Of the 10 analysts covering the stock, 70% recommend a buy while the remaining suggest a hold. There is no sell rating on the stock. The stock has a 2.4% upside from current levels.

5. Allegheny Technologies ( ATI), a diversified specialty metals producer in a range of alloys and product forms, operates in three main segments: high performance metals, flat-rolled products and engineered products. The company is due to release its fourth quarter results on Wednesday.

Allegheny Technologies says progress on the completion of its new hot-rolling and processing facility will gain momentum during the fourth quarter. The company estimates total capital expenditure in 2010 to come in at $250 million. Looking ahead at 2011, ATI sees robust opportunities of supplying to large projects in the oil and gas sector and chemical processing industry, specifically in Asia and the Middle East.

Analysts' consensus estimates say Allegheny Technologies is likely to report net income of $37.4 million on sales of $1.06 billion, compared to net income of $4.9 million on sales of $1.05 billion in the third quarter of 2010. The company is likely to report earnings of 93 cents per share for 2010, compared to earnings of 49 cents per share in 2009. During 2011, earnings per share are likely to more then double to $2.86 from 93 cents in 2010.

With a dividend yield of 1.55%, Allegheny Technologies declared a quarterly cash dividend of 18 cents per share in December, 2010. Of the 11 analysts covering the stock, 64% recommend a buy while the remaining 18% suggest a hold.

4. Harsco ( HSC) is a multinational engaged in diversified industrial services and engineered products. It operates in three business segments: Harsco Infrastructure, Harsco Metals, Harsco Rail and Harsco Minerals & Harsco Industrial. The company is due to release its fourth-quarter results on Thursday.

The company plans to cut almost 800 jobs at one of its units and seeks to incur most of the charges during the fourth quarter. The company estimates almost $85 million to $90 million in net pre-tax restructuring program expenses in the fourth quarter. With net cash payments for the program forecasted at $50 million to $55 million, almost $20 million in cash would be recovered during 2011 through a sale of non-core product line part of restructuring. During 2011, cost savings from restructuring are seen at $40 million to $50 million and annualized savings of $60 million starting 2012.

Analysts polled by Bloomberg see Harsco recporting sales of $3.01 billion in 2010, compared to $2.99 billion in 2009. Indicating a strong cash balance, the company's estimated cash flow per share is seen at $4.21, compared to $1.37 recorded in the third quarter. During 2011, earnings per share are likely surge by 57% to $1.34 from 85 cents in 2010.

With a dividend yield of 3.34%, the company declared a quarterly cash dividend of 20.5 cents per share in November, payable February 15, 2011. Of the 10 analysts covering the stock, 50% recommend a buy while the remaining suggest a hold. There is no sell rating on the stock. The stock has a 5.2% upside from current levels.

3. Consol Energy is a multi-fuel energy producer and energy services provider serving the electric power generation industry in the U.S. it has two main business units: coal and gas. The company is scheduled to release its fourth quarter results on January 27.

With Consol Energy reporting record coal and natural gas production during the fourth quarter, the company's earnings and profit are seen coming in at impressive growth rates. Consol's coal division reported an 8.4% increase in total production to 16.8 million tonnes, the highest in any quarter, The natural gas division recorded a 44% surge to 36.2 billion cubic feet, compared to the year-ago period.

Analysts polled by Bloomberg say the company is likely to report a net income of $125.1 million on sales of $1.39 billion, compared to a net income of $102.4 million on sales of $1.32 billion recorded in the third quarter of 2010. For the quarter, Consol is likely to report earnings per share of 55 cents per share, up from 44 cents in the earlier quarter. During 2011, earnings per share are likely to increase by 38% to $3.11. Additionally, return on assets is seen at 8.12 for 2010, compared to 7.15 recorded in 2009.

With a dividend yield of 1.08%, the company declared a quarterly cash dividend of 10 cents per share in November. Of the 25 analysts covering the stock, 72% recommend a buy while the remaining 20% suggest a hold. The stock has a 13.2% upside from current levels.

2. Nucor ( NUE) is engaged in manufacturing steel and steel products and operates in three main segments: steel mills, steel products and raw materials. The company is due to release its fourth quarter results on January 27.

Nucor expects a 10 cents to 15 cents loss per share for the fourth quarter because of higher material costs and slackened demand in construction sector. However, the company sees improved utilization rates through to the fourth quarter. Meanwhile, looking ahead into the first quarter of 2011, Nucor says higher tariffs for all its steel mill products will have a positive impact on sales volumes.

Analysts polled by Bloomberg say Nucor is likely to report a net income of $114 million during 2010 on sales of $15.82 billion, compared to a net loss of $291.8 million on sales of $11.19 billion recorded in 2009. For 2011, earnings per share are likely to multiply to $2.3, up from 37 cents in 2010.

With a dividend yield of 3.7%, the company increased its regular quarterly cash dividend to 36.25 cents per share in December, from the previous dividend payout of 36 cents. Notably, Nucor has increased its quarterly dividend base for 38 consecutive years now. Of the 13 analysts covering the stock, 31% recommend a buy while the remaining 54% suggest a hold.

1. Arch Coal is a coal producer in the U.S. operating in three main segments: Powder River Basin, the Western Bituminous region and the Central Appalachia region. The company sells coal to power plants, steel mills and industrial facilities. Nucor is due to release its fourth quarter results on January 28.

Looking ahead to 2010, the company estimates earnings per diluted share on a GAAP basis to come in at 94 cents to 98 cents per share, including amortization of coal supply agreements and early debt extinguishment costs. Excluding these charges, EPS would come in at $1.11 to $1.15. Earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) are seen between $718 million and $726 million, the second highest in the company's history.

Analysts polled by Bloomberg say the company is likely to report a net income of $76.4 million on sales of $863.8 million, up from a net income of $57.6 million on sales of $874.7 million recorded during 2010 third quarter. For 2010, Arch Coal is likely to report earnings per share of $1.10 compared to 42 cents in 2009. For 2011, earnings per share are likely to more then double to $2.79 from $1.1 in 2010.

With a dividend yield of 1.4%, the company announced its regular quarterly cash dividend of 10 cents per share in October. Of the 26 analysts covering the stock, 46% recommend a buy while the remaining 46% suggest a hold. The stock has a 16.1% upside from current levels.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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