Why Tenaris SA (TS) Is Down Today

NEW YORK (TheStreet) -- Tenaris SA  (TS) was falling 6.17% to $43.81 on Wednesday afternoon after the U.S. Department of Commerce announced it would not impose tariffs on South Korea's steel pipes used in the oil and natural gas industries. Tenaris promptly fell, along with other steel companies such as United States Steel  (X).

Tenaris and its peers could have benefited from such a tariff, but South Korea, the largest steel exporter among nine nations named in a trade case filed by U.S. Steel Corp. and other producers, avoided it. U.S. Steel and its associates alleged that South Korea had been selling steel pipes at unfairly low prices, but the Department of Commerce stated it found no evidence of such action.

Other steel makers, including AK Steel  (AKS) and Ternium S.A.  (TX), dipped on Wednesday in the wake of the news.

Must Read: Why United States Steel (X) Is Down Today

TheStreet Ratings team rates TENARIS SA as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate TENARIS SA (TS) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TS's debt-to-equity ratio is very low at 0.10 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, TS has a quick ratio of 1.73, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly increased by 52.27% to $753.17 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 14.84%.
  • 41.70% is the gross profit margin for TENARIS SA which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.42% trails the industry average.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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