Olympic Steel Earnings Preview

While Olympic Steel (Nasdaq: ZEUS  ) missed estimates last quarter, investors hope that it will bounce back and outpace Wall Street expectations this quarter. The company will unveil its latest earnings Friday. Olympic Steel is focused on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil, and plate steel products.

What analysts say:

  • Buy, sell, or hold?: The majority of analysts back Olympic Steel as a buy. But with 60% of analysts rating it a buy, Olympic Steel is still below the mean analyst rating of its nearest eight competitors, which average 76.9% buys. Analysts like Olympic Steel better than competitor L.B. Foster Company overall. One out of three analysts rate L.B. Foster Company a buy compared with three of five for Olympic Steel. Analysts haven't adjusted their rating of Olympic Steel for the past three months.
  • Revenue Forecasts: On average, analysts predict $300.4 million in revenue this quarter. That would represent a rise of 43.6% from the year-ago quarter.
  • Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.41 per share. Estimates range from $0.36 to $0.45.

What our community says:
CAPS All-Stars are solidly behind the stock with 92.1% assigning it an "outperform" rating. The community at large concurs with the All-Stars with 90% giving it a rating of "outperform." Fools are bullish on Olympic Steel, though the message boards have been quiet lately with only 88 posts in the past 30 days. Despite the majority sentiment in favor of Olympic Steel, the stock has a middling CAPS rating of three out of five stars.

Management:
The company raised its gross margin by 2.2 percentage points in the last quarter. Revenue rose 34.1% while cost of sales rose 30.8% to $238.6 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q2

Q1

Q4

Q3

Gross Margin

16.4%

22.3%

11.2%

11.5%

Operating Margin

4.9%

5.5%

(0.7%)

(0.6%)

Net Margin

2.8%

3.3%

(0.7%)

(0.6%)

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