In spite of high import penetration by foreign steel producers into U.S. markets, some investor Gurus are buying steel while others wait for a better U.S. trade policy that will even out the playing field of this sector know for margin swings. Here’s a look at the U.S. raw steel production numbers issued last week and an update on Guru trades of three U.S. steel companies.
Last week the American Iron and Steel Institute reported a slight increase in steel production since last year. For Aug. 3, 2013, domestic raw steel production was 1,888,000 net tons while the capability utilization rate was 78.8%, compared to 1,855,000 tons in the same week a year ago, with a capability utilization rate of 74.6%, with steel shipments going mostly to construction at 42% and automakers at 24%.
Universal Stainless & Alloy Products (USAP, Financial)
Competing with domestic and foreign producers of specialty steel products, Universal Stainless & Alloy Products is down 24% over 12 months. The company has a market cap of $184.8 million; its shares trade at around $326.43 with a P/E ratio of 22.70 and P/S ratio of 1. Universal Stainless & Alloy Products had an annual average earnings growth of 11.9% over the past 10 years.
USAP Historical pricing:
Over 10 years, USAP has shown earnings in eight of those years as well as a positive operating cash flow in almost every year except for 2004. Like other steel companies, USAP has swings in gross and net margins, but swing in a steel company’s margins is considered typical.
In July, the company reported that net sales for the second quarter of 2013 were $42.9 million compared with $67.9 million in the second quarter of 2012 and $49.1 million in the first quarter of 2013, primarily due to lower shipment volumes.
Universal Steel’s net income for the second quarter of 2013 was down with $0.5 million, or $0.06 per diluted share, compared with $4.5 million, or $0.62 per diluted share, in the second quarter of 2012. For the first six months of 2013, net sales were $92.0 million and net income was $0.5 million, or $0.06 per diluted share. That compares with net sales of $142.5 million and net income of $10.8 million, or $1.48 per diluted share, in the first six months of 2012. Shipment volume for the first six months of 2013 decreased 33% from the first six months of 2012, according to a company press release.
Guru Action: On July 31, 2013, Alan Fournier’s Pennant Capital Management, a 10% owner, made another purchase of Universal Stainless & Alloy Products (USAP), after a long run of steel buying in 2013. Buying 10,000 shares at $24.55, Fournier increased his USAP position by 0.88%, putting his current shares at 1,143,021.
Fournier’s trading history shows 10 quarters of losses on USAP starting at the end of 2006. In the first quarter of 2013 he bought 73,353 shares at an average price of $35.70 and lost 26.6%.
The Pennant Capital portfolio is heavily weighted with industrials at 27.8%, consumer cyclical at 21.3% and technology at 19.9%. As of Aug. 2, 2013, Pennant listed 42 stocks, four of them new, with a total value of $5.14 billion and a quarter-over quarter turnover of 9%.
Here’s another U.S. steel company that calls itself, “The Little Steel Company that Could.” Nucor Corp. (NUE, Financial) is now the largest manufacturer of steel products in North America and recently reported consolidated net earnings of $85.1 million for the second quarter of 2013.
NUE was actively trade by two Gurus in the second quarter of 2013.
Nucor Corp. (NUE)
Up 14% over 12 months, Nucor Corp. has a market cap of $14.76 billion and trades with a P/E of 35.30. The current share price is $46.44.
Incorporated in 1958, Nucor and its affiliates manufacture steel and steel products. Through its affiliates, Nucor processes ferrous and nonferrous metals and brokers ferrous and nonferrous metals, pig iron, hot briquetted iron and direct reduced iron. Most of the company's operating facilities and customers are located in North America; however, Nucor is expanding its reach outside of North America.
In July Nucor Corporation reported consolidated net earnings of $85.1 million, or $0.27 per diluted share, for the second quarter of 2013, compared to net earnings of $84.8 million, or $0.26 per diluted share, in the first quarter of 2013 and net earnings of $112.3 million, or $0.35 per diluted share, in the second quarter of 2012. For the first half of 2013, Nucor reported consolidated net earnings of $169.9 million, or $0.53 per diluted share, compared with consolidated net earnings of $257.4 million, or $0.81 per diluted share, in the same period last year.
Guru Action: Brian Rogers owns 1.58% of shares outstanding. His trading history shows that he has averaged a gain of 5% on 5,772,900 shares bought at an average price of $ 44.27 per share.
Guru Ken Fisher sold 8,194 shares at an average price of $44.35 per share for a 4.7% gain in the second quarter of 2013.
Historical pricing:
This domestic steel company recently reported a net loss of $78 million for the second quarter of 2013.
United States Steel Corporation (X, Financial)
Down 26% over 12 months, United States Steel Corporation (X) has a market cap of $2.5 billion and trades with a P/E of 392.50.
The current share price is $17.26.
United States Steel Corporation is an integrated steel producer of flat-rolled and tubular products with major production operations in North America and Europe. The company’s steelmaking operations include the production of coke and iron ore pellets, and transportation services via railroad and barge, real estate operations and engineering consulting services.
Guru Action: Chris Davis is the top Guru shareholder of X, and one of five billionaires holding the company. He owns 0.23% of shares outstanding. His trading history shows that he has averaged a loss of 32% on 338,030 shares bought at an average price of $25.23 per share.
Paul Tudor Jones owns 0.07% of shares outstanding after making a new buy in the first quarter of 2013. His trading history shows that he has averaged a loss of 23% on 102,500 shares bought at an average price of $22.32 per share.
At the end of July, United States Steel Corporation reported a second quarter 2013 net loss of $78 million, or $0.54 per diluted share, compared to a first quarter 2013 net loss of $73 million, or $0.51 per diluted share, and second quarter 2012 net income of $101 million, or $0.62 per diluted share. The company’s adjusted net loss for the first quarter 2013 was $51 million, or $0.35 per diluted share. Adjusted net income for the second quarter 2012 was $112 million, or $0.69 per diluted share.
Historical pricing:
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Last week the American Iron and Steel Institute reported a slight increase in steel production since last year. For Aug. 3, 2013, domestic raw steel production was 1,888,000 net tons while the capability utilization rate was 78.8%, compared to 1,855,000 tons in the same week a year ago, with a capability utilization rate of 74.6%, with steel shipments going mostly to construction at 42% and automakers at 24%.
Universal Stainless & Alloy Products (USAP, Financial)
Competing with domestic and foreign producers of specialty steel products, Universal Stainless & Alloy Products is down 24% over 12 months. The company has a market cap of $184.8 million; its shares trade at around $326.43 with a P/E ratio of 22.70 and P/S ratio of 1. Universal Stainless & Alloy Products had an annual average earnings growth of 11.9% over the past 10 years.
USAP Historical pricing:
Over 10 years, USAP has shown earnings in eight of those years as well as a positive operating cash flow in almost every year except for 2004. Like other steel companies, USAP has swings in gross and net margins, but swing in a steel company’s margins is considered typical.
In July, the company reported that net sales for the second quarter of 2013 were $42.9 million compared with $67.9 million in the second quarter of 2012 and $49.1 million in the first quarter of 2013, primarily due to lower shipment volumes.
Universal Steel’s net income for the second quarter of 2013 was down with $0.5 million, or $0.06 per diluted share, compared with $4.5 million, or $0.62 per diluted share, in the second quarter of 2012. For the first six months of 2013, net sales were $92.0 million and net income was $0.5 million, or $0.06 per diluted share. That compares with net sales of $142.5 million and net income of $10.8 million, or $1.48 per diluted share, in the first six months of 2012. Shipment volume for the first six months of 2013 decreased 33% from the first six months of 2012, according to a company press release.
Guru Action: On July 31, 2013, Alan Fournier’s Pennant Capital Management, a 10% owner, made another purchase of Universal Stainless & Alloy Products (USAP), after a long run of steel buying in 2013. Buying 10,000 shares at $24.55, Fournier increased his USAP position by 0.88%, putting his current shares at 1,143,021.
Fournier’s trading history shows 10 quarters of losses on USAP starting at the end of 2006. In the first quarter of 2013 he bought 73,353 shares at an average price of $35.70 and lost 26.6%.
The Pennant Capital portfolio is heavily weighted with industrials at 27.8%, consumer cyclical at 21.3% and technology at 19.9%. As of Aug. 2, 2013, Pennant listed 42 stocks, four of them new, with a total value of $5.14 billion and a quarter-over quarter turnover of 9%.
Here’s another U.S. steel company that calls itself, “The Little Steel Company that Could.” Nucor Corp. (NUE, Financial) is now the largest manufacturer of steel products in North America and recently reported consolidated net earnings of $85.1 million for the second quarter of 2013.
NUE was actively trade by two Gurus in the second quarter of 2013.
Nucor Corp. (NUE)
Up 14% over 12 months, Nucor Corp. has a market cap of $14.76 billion and trades with a P/E of 35.30. The current share price is $46.44.
Incorporated in 1958, Nucor and its affiliates manufacture steel and steel products. Through its affiliates, Nucor processes ferrous and nonferrous metals and brokers ferrous and nonferrous metals, pig iron, hot briquetted iron and direct reduced iron. Most of the company's operating facilities and customers are located in North America; however, Nucor is expanding its reach outside of North America.
In July Nucor Corporation reported consolidated net earnings of $85.1 million, or $0.27 per diluted share, for the second quarter of 2013, compared to net earnings of $84.8 million, or $0.26 per diluted share, in the first quarter of 2013 and net earnings of $112.3 million, or $0.35 per diluted share, in the second quarter of 2012. For the first half of 2013, Nucor reported consolidated net earnings of $169.9 million, or $0.53 per diluted share, compared with consolidated net earnings of $257.4 million, or $0.81 per diluted share, in the same period last year.
Guru Action: Brian Rogers owns 1.58% of shares outstanding. His trading history shows that he has averaged a gain of 5% on 5,772,900 shares bought at an average price of $ 44.27 per share.
Guru Ken Fisher sold 8,194 shares at an average price of $44.35 per share for a 4.7% gain in the second quarter of 2013.
Historical pricing:
This domestic steel company recently reported a net loss of $78 million for the second quarter of 2013.
United States Steel Corporation (X, Financial)
Down 26% over 12 months, United States Steel Corporation (X) has a market cap of $2.5 billion and trades with a P/E of 392.50.
The current share price is $17.26.
United States Steel Corporation is an integrated steel producer of flat-rolled and tubular products with major production operations in North America and Europe. The company’s steelmaking operations include the production of coke and iron ore pellets, and transportation services via railroad and barge, real estate operations and engineering consulting services.
Guru Action: Chris Davis is the top Guru shareholder of X, and one of five billionaires holding the company. He owns 0.23% of shares outstanding. His trading history shows that he has averaged a loss of 32% on 338,030 shares bought at an average price of $25.23 per share.
Paul Tudor Jones owns 0.07% of shares outstanding after making a new buy in the first quarter of 2013. His trading history shows that he has averaged a loss of 23% on 102,500 shares bought at an average price of $22.32 per share.
At the end of July, United States Steel Corporation reported a second quarter 2013 net loss of $78 million, or $0.54 per diluted share, compared to a first quarter 2013 net loss of $73 million, or $0.51 per diluted share, and second quarter 2012 net income of $101 million, or $0.62 per diluted share. The company’s adjusted net loss for the first quarter 2013 was $51 million, or $0.35 per diluted share. Adjusted net income for the second quarter 2012 was $112 million, or $0.69 per diluted share.
Historical pricing:
If you are not a Premium Member, we invite you for a 7-day Free Trial.
GuruFocus Real Time Picks reports the stock purchases and sales that Gurus have made within the prior 2 weeks. The report time lag can be as short as 2 days after the date of the transaction. This feature is for Premium Members only.
Check out the GuruFocus special feature 52-week low screener to find the stocks hitting new lows but are still held by top investor Gurus and Insiders.
