NEW YORK (TheStreet) -- AK Steel (AKS), United States Steel Corporation (X) and Companhia Siderurgica Nacional (SID) tumbled on Tuesday after iron ore prices fell to their lowest level in six months. The steel producers took a dive on data out of China which showed weakening demand for iron ore, a key component of steel, and slowing steel production.
Benchmark Chinese iron ore prices slipped nearly 2% to $124.80 a tonne, contributing to a loss of more than $10 a tonne since the beginning of the year.
A commodities report from Capital Economics noted the price of copper, iron ore and steel prices will continue to fall over 2014 on an imbalance of supply growth versus demand for the product.
By late afternoon, AK Steel had dipped 3.1% to $6.79, United States Steel Corporation was 2.1% lower to $26.84, and Brazil-based Companhia Siderurgica Nacional dropped 8.9% to $5.36.
TheStreet Ratings team rates COMPANHIA SIDERURGICA NACION as a Hold with a ratings score of C. The team has this to say about their recommendation:
"We rate COMPANHIA SIDERURGICA NACION (SID) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SID's revenue growth has slightly outpaced the industry average of 3.9%. Since the same quarter one year prior, revenues rose by 13.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Metals & Mining industry and the overall market, COMPANHIA SIDERURGICA NACION's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- COMPANHIA SIDERURGICA NACION reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, COMPANHIA SIDERURGICA NACION swung to a loss, reporting -$0.14 versus $1.36 in the prior year. This year, the market expects an improvement in earnings ($0.93 versus -$0.14).
- The debt-to-equity ratio is very high at 3.67 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, SID has managed to keep a strong quick ratio of 2.09, which demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has decreased to $272.23 million or 32.78% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: SID Ratings Report