U.S. Markets open in 8 hrs 55 mins

Universal Stainless Down to Strong Sell

Zacks Equity Research

On Nov 6, Zacks Investment Research downgraded specialty steel maker Universal Stainless & Alloy Products Inc. (USAP) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Universal Stainless posted disappointing third-quarter 2013 results on Nov 4. The company reported loss of $1.7 million or 25 cents per share versus a profit of $2.7 million or 38 cents in the year-ago quarter. The loss per share was, however, in line with the Zacks Consensus Estimate. The company has delivered average negative surprise of 1.29% for the trailing four quarters.

Revenues decreased 21% to $48.5 million in the third quarter from $61.4 million in the year-ago quarter. Shipments declined 15% year over year in the reported quarter. During the quarter, the company also lowered its production levels across most of its operations in response to market conditions. The shift in sales mix combined with reduced surcharges and considerably lower manufacturing utilization negatively impacted the gross margin in the third quarter.

Universal Stainless expects weak industry conditions to persist during the remainder of 2013. The company is also in the process of finalizing a new amendment to its bank credit facilities which will allow greater flexibility entering 2014.

Following the third quarter earnings release, the Zacks Consensus Estimate for 2013 for Universal Stainless dropped 66.7% to 10 cents per share. Similarly, the Zacks Consensus Estimate for 2014 has decreased 12.3% to $1.43 per share.

Other Stocks to Consider

Other companies in the steel industry with favorable Zacks Rank include Companhia Siderurgica Nacional (SID), Shiloh Industries Inc. (SHLO) and Unites States Steel Corp. (X). While both Companhia Siderurgica and Shiloh Industries hold a Zacks Rank #1 (Strong Buy), United States Steel carries a Zacks Rank #2 (Buy).

Read the Full Research Report on USAP
Read the Full Research Report on SID
Read the Full Research Report on X
Read the Full Research Report on SHLO

Zacks Investment Research