NEW YORK ( TheStreet) -- General Steel Holdings ( GSI), U.S. Steel ( X) and AK Steel ( AKS) are among 10 stocks with 7%-120% upside, analysts polled by Bloomberg report.
World crude steel production increased 8.8% to 117 million metric tons in February compared to the year-ago month, the World Steel Association reports. Among major steel producing countries, China recorded highest production growth of 9.7%, followed by Germany at 7.9%, Japan at 5.7%, and the U.S. at 5.6%. As global steel demand spikes, capacity utilization ratio has been increasing over the past few months. Global steel production exceeded 1.4 billion metric tons in 2010 with China accounting for more than 600 million metric tons. Industry analysts believe that China-based steel companies will play a key role in Japan's reconstruction efforts. For 2011, the WSA estimates global steel demand to increase 5.3% to 1.34 million tons with India's demand increasing by 13.6% and the EU's rising by 4%, with the industrial sector driving the demand spike. However, over capacity could plague the industry, specifically in the developed western economies. Consequently, if steelmakers ramp up production at a faster rate, it could hit the profitability levels of steel producers.
10. Allegheny Technologies ( ATI) is a diversified specialty metals producer with products ranging from alloys and product forms. The company's focus is on its technological and unsurpassed manufacturing capabilities to serve the global end-use markets with diversified and specialized product offerings. For 2010, the company reported 33% increase in total sales to $4.05 billion. Net income increased to $70.7 million, or 72 cents per share, compared to $31.7 million, or 32 cents per share. The company recently went ex-dividend as per which shareholders will be eligible for a dividend of 18 cents per share. For 2011, the company estimates revenue growth of 15% to 20% as compared to 2010 levels. Meanwhile, by segment, operating profit is pegged at 15% of sales compared to 8.8% recorded in 2010. The company's chairman and CEO added that ATI is likely to benefit from the ongoing market and product development activities through which they seek to launch innovative new ATI alloys. ATI estimates 2011 total titanium shipments to increase by approximately 30% to 50 million pounds. Capital expenditure for the year is forecasted at $300 to $350 million. Of the 10 analysts covering the stock, 60% recommend a buy while 20% rate a hold on it. Analysts polled by Bloomberg envisage an average 12-month price target of $70.1 - about 7% higher than the stock's current price.
9. Steel Dynamics ( STLD) is a steel producer and metals recycler operating in three segments: steel operations, metals recycling and ferrous resources operations and steel fabrication, and is involved in the fabrication and sale of steel joists and decking products. For full-year 2010, the company reported net income of $141 million, or 64 cents per share, on net sales of $6.3 billion compared to a net loss of $8 million, or 4 cents per share, on net sales of $4 billion in 2009. The company recently declared a quarterly cash dividend of 10 cents per common share, up 33% from 2010 fourth quarter dividend. The dividend is payable on April 14, 2011. For first quarter of 2011, the company estimates earnings per share in the range of 37 cents and 42 cents as compared to 29 cents recorded in the first quarter of 2010. The company estimates sluggish residential and non-residential construction activity; however, steel consumption in the automotive, transportation, energy, industrial, and agricultural and construction equipment sectors is expected to spike. Of the 10 analysts covering the stock 80% recommend a buy while 10% rate a hold. Data from Bloomberg has analysts predicting an average 12-month price target of $22.2, about 18% higher than the stock's recent price.
8. Reliance Steel & Aluminum ( RS), a metals service center company, provides metals processing services and distributes a line of more than 100,000 metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium and specialty steel products sold to more than 125,000 customers across a range of industries. The company operates across 38 states through a network of more than 200 locations. For full-year 2010, net income stood at $194.4 million, or $2.61 per share, up 31% from $148.2 million, or $2.01 per share. Sales for the period rose 19% to $6.31 billion with 3.73 million tons of metal sold at an average $1,683 per ton. Going forward, the company estimates 2011 first quarter earnings per share to come in the range of 90 cents and $1. Additionally, the company raised its regular quarterly cash dividend by 20% to 12 cents per share from 10 cents earlier. First quarter 2011 cash dividend is payable today. Of the 9 analysts covering the stock, 89% recommend a buy. Analysts polled by Bloomberg forecast a 12-month price target of $66.3, about 18% higher than the stock's current price.
7. U.S. Steel ( X), an integrated steel producer, has major operations in North America and Europe for flat-rolled and tubular products. The company has operates in three major segments: flat-rolled products, U. S. Steel Europe, and tubular products. The company's other businesses include transportation and real estate services. For full-year 2010, the company reported 60% increase in revenue to $17.4 billion from $11 billion recorded in 2009. Average price for flat-rolled steel increased from $651 in 2009 to $675 in 2010. Operating loss for the same period narrowed. Industry analysts believe that as compared to steel producers Nucor and ArcelorMittal, U.S. Steel has the advantage of its long-standing relationship with automobile companies General Motors, Ford, and Chrysler, which contribute almost 20% towards sales. The company believes that its flat-rolled steel operations in the U.S. will prove to be its biggest source of value in the upcoming years. Demand surge from China, India, and South Korea will push steel prices higher. Meanwhile, as U.S. Steel operates at only 70% of its capacity it has adequate opportunity to leverage on the reserve capacity to meet growing demand. Of the 13 analysts covering the stock, 54% recommend a buy while 38% rate a hold. Data from Bloomberg has analysts reporting an average 12-month price target of $65.1, which is 19% higher than the stock's current price.
6. AK Steel Holding ( AKS) through its wholly owned subsidiary produces flat-rolled carbon, stainless and electrical steels and tubular products from its seven steelmaking and finishing plants located in Indiana, Kentucky, Ohio and Pennsylvania. Besides, the company also has a wholly owned subsidiary AK Tube. The company recently upgraded its specialty steel businesses through the addition of a new ladle metallurgy furnace and an electric arc furnace to its Butler Works plant in Pennsylvania. The company's chairman believes that this new furnace can process 1.4 million tons of steel annually, which will not only help improve product quality but also boost steelmaking capacity and reduce production costs. AK Steel is scheduled to release its first-quarter earnings on April 26, 2011. For first quarter of 2011, the company estimates a 5% to 7% sequential increase in shipments to 1,450,000 tons with an approximate 8% increase in average selling price per ton, led by an expected higher contract and spot market prices and better product mix. The company foresees significant improvement in operating levels in the first half of 2011 from the fourth quarter of 2010. Of the 12 analysts covering the stock, 33% recommend a buy and 50% rate a hold. Analysts polled by Bloomberg expect an average 12-month price target of $18.7, which is 21% higher than the stock's current price.
5. Metals USA Holdings ( MUSA) is engaged in providing processed carbon steel, stainless steel, aluminum, red metals and manufactured metal components. The company operates through three main groups: plates and shapes, flat-rolled and non-ferrous, and building products group. For the latest fourth quarter, net sales increased by 32% to $323.9 million with shipments 22% higher as compared to the year-ago market. For full-year 2010, net income more than tripled to $11.5 million from $3.5 million in 2009. Heading into 2011, the company says that the benefit of the steel price increases by several mills during the past few months will be reflected in the revenue of first quarter2011. The company recently closed the acquisition of The Richardson Trident - its third and largest acquisition since its IPO last April. With this acquisition, Metals USA seeks to expand into desired target markets in the Southeast, South central, Northeast and the West Coast of the U.S. and in sectors such as aerospace, defense, transportation, and oil and gas field services. Trident's high EBITDA margin could push overall MUSA's EBITDA margin higher and prove accretive to its results, as the acquisition is an attractive valuation on a cycle average basis. Of the nine analysts covering the stock, 67% recommend a buy while the remaining rate a hold. There are no sell ratings on the stock. The stock's average 12-month price target is $20.3, which is 30% higher than the current price, as per analysts surveyed by Bloomberg.
4. Ternium ( TX) a steel company in Latin America is involved in manufacturing and processing a range of flat and long steel products for the construction, home appliances, capital goods, container, food, energy and automotive industries. For its latest fourth quarter, the company reported 41% increase in net sales to $1.93 billion from the year-ago period with shipments rising 27%. The company's board of directors proposed an annual dividend of $0.075 per share, or $150.4 million, payable on June 9, 2011 after approval. For full-year 2010, revenues increased 49% while net income edged up marginally by 2% from 2009 levels. For first quarter of 2011, operating income is likely to improve sequentially, primarily on improving margins in the North America operating profit. Higher prices and shipment levels, partially offset by increased cost per ton, would sustain higher margins. For 2011, Terenium foresees growth accelerating in the NAFTA region, led by higher industrial activity in Mexico. Furthermore, demand from South American economies will continue during 2011. All the 11 analysts covering the stock recommend a buy on it. As per analysts surveyed by Bloomberg, the average 12-month price target is $47.1, nearly 32% higher than the stock's current price.
3. General Steel Holdings ( GSI), operates a portfolio of Chinese companies engaged in the production of a variety of steel products including reinforced bars (rebar), hot-rolled carbon and silicon sheets, spiral-weld pipes and high-speed wire. The company has interests in four steel-related subsidiaries: General Steel (China), Baotou Steel, Shaanxi Longmen Iron and Steel (Long Steel Group), and Maoming Hengda Steel Group. For fourth quarter of 2010, the company recorded year-over-year increase of 6% in its total revenues to $478.6 million. Net income reported was $2.2 million as compared to a net loss of $11.1 million on higher revenue led by higher steel prices. For full-year 2010, revenue increased 13% and net loss narrowed 69.4% from 2009. Looking ahead, the company expects demand to continue in 2011 from the infrastructure, housing and transportation sectors. The company expects the measures it adopted in 2010 will allow it to capitalize on the current strong global demand for steel. Furthermore, it believes that China's western region presents a window of opportunity given the large-scale construction and development. Of the two analysts covering the stock, 50% recommended a buy while the remaining rate it a hold. The stock's average 12-month price target is $4, or 65% higher than the current price, analysts polled by Bloomberg say.
2. China Gerui Advanced Materials ( CHOP) is a leading niche and high value-added steel company that utilizes advanced technology to produce specialty steel products. Its products include high-end, high precision, ultra-thin, high-strength and cold-rolled steel products that are used in industries like food packaging, telecom, electrical appliances and construction materials. For the first nine months of 2010, the company recorded 16.1% and 11.5% increase in total revenue and net income, respectively compared to the same period a year ago. For full-year 2010, China Gerui estimates revenues at $252 million on a net income of $48 million as compared to revenue of $218.9 million on a net income of $43.4 million in 2009. For 2011, the company forecasts revenue in the range of $330 million to $345 million and net income between $70 and $75 million. By Dec. 2011, the company expects to double its existing production capacity to 500,000 tons annually and increase its chromium plating capability to 250,000 tons. The expansion will be in two phases and total expenditure incurred is pegged at $42 million (90% spent as of date) and $12 million in capital expenditure. Phase I of the capacity expansion involves the construction of two new cold-rolled wide-strip steel production lines with Phase I capacity utilization rate seen at 50% and reach 75% by September 2011. All the five analysts covering the stock recommend a buy on it. The stock's average 12-month price target is $9.7, about 76% higher than the current price, as per analysts surveyed by Bloomberg.
1. Sutor Technology Group ( SUTR) is a China-based company manufacturing fine finished steel products used by steel fabricators and in other downstream applications. The company's product offerings include finished steel products, hot-dip galvanized steel (HDG Steel), pre-painted galvanized steel (PPGI), acid-pickled steel (AP Steel), cold-rolled steel and welded steel pipe products. For the latest second quarter ending Dec. 31, 2010, the company reported 9.6% increase in gross profit to $9.5 million on the focus to produce higher margin products. The company is seeking to transit slowly to producing high-end and higher gross margin products. Cash and cash equivalents stood at $9.1 million and stockholders' equity was up 7% to $182.8 million. Looking ahead, the company has sufficient capital for regular operations at current level for 2011. In January 2011 SUTR received international sales orders of 10,000 tons as compared to 10,500 tons such order received during the entire 2010 third quarter. Further, the company recently opened two new offices in Ningbo and Shanghai to leverage the ongoing industrial upgrading and urbanization processes in China. Of the two analysts covering the stock, 50% recommend a buy while the remaining rate a hold. There are no sell ratings on the stock. Analysts polled by Bloomberg forecast an average 12-month price target of $3.6, nearly 120% higher than the stock's current price. >>To see these stocks in action, visit the 10 Steel Stocks With Upside portfolio on Stockpickr.