Why Olympic Steel's Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of manufacturer Olympic Steel (NASDAQ: ZEUS  ) dropped 12% today after the company reported earnings.

So what: Third quarter revenue dropped 11.3% to $304 million, missing Wall Street's $331.8 million estimate by a wide margin. On the bottom line, earnings of $0.12 per share were $0.27 below estimates, despite cost reductions.  

Now what: Clearly the company's end markets are struggling, and a transition to higher value products is taking time. Despite improved margins, investors may be walking into a value trap in Olympic Steel. Shares trade at just 14 times next year's estimates, but if revenue continues to deteriorate there's nowhere to go but down. I'm definitely not a buyer today, and would wait for revenue improvements before considering the stock.

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Related Tickers

4/17/2014 3:59 PM
ZEUS $27.23 Up +0.23 +0.85%
Olympic Steel, Inc… CAPS Rating: **

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