Schnitzer Steel Industries, Inc. Earnings: Margins Shrink on Rising Costs, Net Income Falls

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

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Schnitzer Steel Industries Earnings Cheat Sheet for the Third Quarter

Results: Net income for Schnitzer Steel Industries, Inc. fell to $33 million ($1.18 per share) vs. $40.5 million ($1.43 per share) a year earlier. This is a decline of 18.4% from the year earlier quarter.

Revenue: Rose 39.4% to $981.1 million from the year earlier quarter.

Actual vs. Wall St. Expectations: SCHN was about in line with expectations as the mean analyst estimate of a loss of $1.19 per share. Estimates ranged from $1.05 per share to $1.46 per share.

Quoting Management: “We are pleased to report another strong quarter of performance with revenues and operating income up sequentially by 36% and 20%, respectively. Year-to-date we have generated a 43% increase in revenues and a 28% increase in operating income,” said Tamara Lundgren, President and Chief Executive Officer. “Our results demonstrate a steady upward trend throughout fiscal 2011, driven by continued global demand for our recycled metal products as well as the early contributions from our recent acquisitions.”

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 44.9%, with the biggest boost coming in the first quarter when revenue rose 71.2% from the year earlier quarter.

Gross margin shrank 3.6 percentage points to 11.3%. The contraction appeared to be driven by increased costs, which rose 45.4% from the year earlier quarter while revenue rose 39.4%.

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).

Stock Performance: Shares of SCHN are up over 1.5% today…

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(Source: Xignite Financials)