بالنسبة للسهم اعلاه ارفق لكم جزء قليل من تقرير
والذي يوفره لي البروكر الخاض بي
والتارجت 35 دولار
Highlights June 09, 2005
We look for a sales increase of 7% in 2005, based on our expectation of an 8% rise in volume and a 1.6% decline in the average selling price. Market share gains and a full year of production at the new special bar quality mill should boost shipments. However, we believe spot steel prices may have peaked in 2004. At the end of 2003, distributor and end-user inventories of steel products were low; at the end of 2004, we believe such inventories were higher. Other factors that we think could place downward pressure on prices include rising domestic production and a higher level of imports. An improved mix and more sales under contract should partially negate the impact of higher supply and cushion the impact on average realized prices. With STLD experiencing margin erosion due to lower realized prices and higher than expected first half costs, we look for a decline in operating profit for the year. After slightly lower interest expense and an unchanged tax rate, we see a decrease in EPS in 2005.
For the longer term, we see sales and EPS benefiting from market share gains, further anticipated acquisitions, an increased proportion of higher margin products in the sales mix, and the introduction of low-cost scrap substitutes into STLD's steelmaking.
According to preliminary data compiled by the American Iron and Steel Institute, domestic steel shipments increased 6.1% in 2004.
Investment Rationale/Risk June 09, 2005
Based on valuation and our view of STLD's attractiveness as a cyclical growth company, we have a buy opinion on the shares of what we see as a highly efficient steel producer. With our view of its strong balance sheet, rising free cash flow, ability to make profitable acquisitions and low cost structure, we believe STLD has the potential to increase sales and EPS via acquisitions, additions of new plants and commercialization of new scrap substitute technology. Following a large sell-off in steel and other metals stocks beginning in early March 2005, STLD was recently trading at 6X our 2005 EPS estimate. Given that steel stocks have traditionally sold at a 50% discount to the P/E of the S&P 500, we believe that STLD is attractive at current levels. Recently, the S&P 500 was trading at 18X 2005's estimated EPS. We also note that STLD has initiated a dividend and recently reauthorized its share repurchase program.
Risks to our recommendation and target price include greater than anticipated weakness in the company's end markets.
We believe STLD should sell at a P/E of about 8X our EPS estimate for 2005, which is at the low end of its historical range and less than one half of the P/E of the S&P 500. On that basis, our 12-month target price is $35.
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