Schnitzer Steel Industries, Inc.

Schnitzer Steel Industries, Inc. (SCHN - Snapshot Report) shares are flying high from the momentum of the company's second quarter. Revenue was up 24% and profit was up 29%. Moving forward, the company said that it expects sales volumes to remain strong and prices to increase up to 10%.

Full Analysis

Schnitzer Steel Industries, Inc. collects scrap metal and used cars in order to recycle raw materials and parts. The scrap metal is used to produce new steel products and some of the used car parts are re-sold to end consumers on a retail level. The company was founded in 1946 and is headquartered in Portland, Oregon.

Schnitzer reported very strong second quarter results on Apr 3, in which both revenue and profit were up sharply. Revenue was up more than 24% to $751.5 million. Profit increased 29% to $35.9 million, producing earnings of $1.25 per share, well ahead of analyst estimates, who were looking for $1.00.

Schnitzer said that revenue at the metals recycling business, which comprises 80% of the company's business, rose 23% to $597, driven by high demand, higher volume, and higher prices. Revenue at the company's auto parts business increased 29% to $77 million. Revenue at its steel manufacturing business rose 45% to $143 million.

Average net ferrous (which means metals that contain iron) selling prices were $326 per ton, up 38% from last year.

Schnitzer provided bullish guidance moving forward. The company expects third-quarter ferrous processing sales volumes in its metals recycling business to remain strong. Schnitzer also said it expects average selling prices to increase 10%.

The analyst community is bullish on the company as well, with the current-quarter consensus estimate projecting quarterly earnings of $1.68 per share. This would mark a significant increase from the most recent quarter in which earnings totaled $1.25.

The current-year estimate has been gained 69 cents in just the last seven days, as two covering analysts boosted their projections. The consensus estimate now stands at $5.33 per share.

After finding a short-term bottom on Mar 10, shares of Schitzer have been in a very steady up trend, moving from $57 to a high point of over $82. This enabled shares to eclipse the old 52-week and all-time high just above $77. Moving forward, if shares should slow down and take a breather, this should be an area of support. Beyond that, the trend is strong and this company has shown it knows how to capitalize on industry growth trends, which should translate nicely into share value appreciation. Take a look at the chart below.