Schnitzer Steel Industries Inc. Earnings: Margins Shrink as Costs Rise, Profit Falls

Rising costs hurt Schnitzer Steel Industries Inc. (NASDAQ:SCHN) in the first quarter as profit dropped from a year earlier. Schnitzer Steel Industries is currently a recycler of ferrous and nonferrous scrap metal and used and salvaged vehicles. It is also a manufacturer of finished steel products.

Investing Insights: Here’s Why Chipotle’s Stock Keeps Winning.

Schnitzer Steel Industries Earnings Cheat Sheet for the First Quarter

Results: Net income for Schnitzer Steel Industries Inc. fell to $7 million (25 cents per share) vs. $17.8 million (64 cents per share) a year earlier. This is a decline of 60.6% from the year earlier quarter.

Revenue: Rose 20.3% to $812.2 million from the year earlier quarter.

Actual vs. Wall St. Expectations: SCHN beat the mean analyst estimate of 23 cents per share. It beat the average revenue estimate of $790.3 million.

Quoting Management: “Market conditions deteriorated in the midst of our first fiscal quarter as the global steel manufacturing industry scaled back raw material purchases on expectations of a weaker global economy,” said Tamara Lundgren, President and Chief Executive Officer. “Despite the short-term volatility, all indications are that long-term demand fundamentals in our export markets remain strong, primarily due to expectations for further growth and increasing urbanization in developing economies, and increasing usage of recycled metals globally.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 45.6%, with the biggest boost coming in the first quarter of the last fiscal year when revenue rose 71.2% from the year earlier quarter.

Gross margin shrank 2.1 percentage points to 8.6%. The contraction appeared to be driven by increased costs, which rose 23.2% from the year earlier quarter while revenue rose 20.3%.

The company has now beaten estimates the last two quarters. In the fourth quarter of the last fiscal year, it topped expectations with net income of $1.33 versus a mean estimate of net income of $1.22 per share.

Looking Forward: Over the past ninety days, the average estimate for the second quarter has fallen from $1.06 per share to 82 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. At $3.65 per share, the average estimate for the fiscal year has fallen from $5 ninety days ago.

Competitors to Watch: Sims Metal Management Ltd (NYSE:SMS), Commercial Metals Company (NYSE:CMC), Steel Dynamics, Inc. (NASDAQ:STLD), Nucor Corporation (NYSE:NUE), Metalico, Inc. (AMEX:MEA), Worthington Industries, Inc. (NYSE:WOR), AK Steel Holding Corp. (NYSE:AKS), Titanium Metals Corp. (NYSE:TIE), Grupo Simec S.A.B. de C.V. (AMEX:SIM), and United States Steel Corp. (NYSE:X).

Investing Insights: Here’s Why Chipotle’s Stock Keeps Winning.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

 

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com