Korean steelmaker POSCO (NYSE:PKX) reports third-quarter 2006 earnings results Friday afternoon. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

  • Buy, sell, or waffle? Twenty-two analysts follow POSCO. All but two of them rate the stock a buy; for the remainder, one says hold and one says sell.
  • Revenues and earnings. A handful of these analysts contribute annual earnings estimates to FirstCall's polls, but none of them predicts quarterly sales or earnings.

What management says:
If you caught my interview with NovamericanSteel (NASDAQ:TONS) president Scott Jones back in August, you may recall his answer (registration required) to one question I posed on the real "globality" of the steel industry. Specifically, I asked how well a U.S. steelmaker could really compete against a company like POSCO for supplying steel to Japan's automakers. Jones responded that, for a few reasons, "The long and the short of it is that you're not likely to find North American steel being shipped to a manufacturer in Japan." I mention this because, in the height of coincidence, POSCO itself up and announced last month that it has signed a memorandum of understanding (with an unspecified counterparty) indicating its intent to construct a continuous galvanized production line in Mexico -- to supply automotive grade steel to automakers in the U.S.! As the saying goes, if the mountain can't economically export steel to Mohammad.

What management does:
Like steelmaking rivals U.S. Steel (NYSE:X) and Mittal (NYSE:MT) -- but unlike rival Nucor (NYSE:NUE) -- POSCO's profits have suffered from the rising cost of energy and raw materials in recent quarters. On a rolling basis, margins crested roughly one year ago, and have been sliding ever since.

However, Stephen Simpson pointed out last quarter that things may have begun turning around at POSCO, thanks largely to the ebbing and flowing of raw materials moving back into an "ebb" phase: "With input prices essentially locked in for the year (iron is more expensive, coking coal less) and price hikes moving through, management seemed cautiously optimistic about the back half of this year."

Margins %

3/05

6/05

9/05

12/05

3/06

6/06

Gross

28.7

30.5

30.5

29.2

26.9

23.0

Op.

24.2

25.6

25.5

23.3

20.4

17.9

Net

15.8

18.3

18.3

15.6

13.6

11.6
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Mathew Emmert, the dividend-loving lead analyst for Motley Fool Income Investor, and the man who advised our readers to buy POSCO a little over a year ago (i.e., 38% ago), recently updated Income Investor members on his thoughts about the stock. What is his intrinsic value, and should you buy POSCO today? We'll be happy to tell you, but first, you'll need to at least try, for free, a subscription to Income Investor. Give it a shot for 30 days, read what Mathew thinks the stock is worth and why, and if you're not thrilled with his analysis, feel free to cancel -- no charge whatsoever. Click here to check it out.

For more Foolish reading:

POSCO is a Motley Fool Income Investor recommendation, and Mittal is a Motley Fool Inside Value pick.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.