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Universal Stainless Down to Strong Sell

Zacks Equity Research

On Sep 21, Zacks Investment Research downgraded specialty steel maker Universal Stainless & Alloy Products Inc. (USAP) to a Zacks Rank #5 (Strong Sell).

Why Downgraded?

Universal Stainless posted disappointing second-quarter 2013 results on Jul 31. Profit slumped around 89% to $0.5 million or 6 cents a share from $4.5 million or 62 cents a share posted in the prior-year quarter. Adjusted earnings of 9 cents per share missed the Zacks Consensus Estimate of 16 cents. The company has delivered average negative surprise of 0.19% for the trailing four quarters.

Revenues decreased 37% to $42.9 million in the second quarter from $67.9 million in the year-ago quarter, missing the Zacks Consensus Estimate of $56 million. The results were impacted by lower volumes and demand as supply channel destocking continued along with declining nickel prices. Short industry lead times also led to delaying in placing new orders by the customers. The quarter’s performance was also hurt by lower shipment volumes.

Universal Stainless is expecting supply channel demand to begin to gain traction in the fourth quarter. The company also expects its end markets to remain strong in the long term. The company will also focus on leveraging its strengths in its facilities and enhance sales mix with higher margin products. Universal Stainless plans to tap the opportunities in the end markets through efficient customer service and products.

The Zacks Consensus Estimate for 2013 for Universal Stainless has gone down 65.5% to 30 cents per share as all estimates were revised lower over the last 60 days. Similarly, the Zacks Consensus Estimate for 2014 has decreased 32.6% to $1.86 per share.

Other Stocks to Consider

Other companies in the steel industry with favorable Zacks Rank are Companhia Siderurgica Nacional (SID), Shiloh Industries Inc. (SHLO) and Nippon Steel & Sumitomo Metal Corporation (NSSMY). All of them hold a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on SIDRead the Full Research Report on SHLORead the Full Research Report on USAPRead the Full Research Report on NSSMYZacks Investment Research