Posco

Posco makes big profits as steel demand remains strong worldwide and prices continue to rise. Second quarter revenues rose 28.3% compared to a year ago. The company has a forward P/E of only 9.06.

Company Description

Posco (PKX - Analyst Report) is the fourth-largest steel manufacturer in the world and the largest in Korea.

The company, a Zacks #1 Rank (Strong Buy), was founded 40 years ago and is headquartered in Seoul, South Korea. Posco has global operations in India, Vietnam, Australia, Mexico and South Africa.

On July 11, Posco reported second quarter earnings and saw net income and revenues rise year-over-year. Net income increased 34% to $1.491 billion from $1.113 billion in the second quarter of 2007.

Revenues jumped 28.3% to $7.458 billion from $5.815 billion in the year-ago period.

The company attributed the higher profit to a strong performance in the steel sector. Steel sales were up 22.3% year-over-year.

PKX continues to expand in India, Vietnam, and Mexico. Posco is acquiring a coal mine in Queensland, Australia to improve its self-sufficiency. The company also acquired a manganese mine in South Africa.

Posco Provides Bullish Outlook

Posco expects steel prices to remain strong due to raw material price hikes and supply/demand imbalances. Demand from emerging market countries is not abating but the company is watching stagflation anxiety in the developing countries.

The company projects nearly every worldwide region to remain strong with the exception of the United States which it says is a soft market. PKX said high oil prices are also spurning more steel demand as more ships, rigs and other energy-related infrastructures are built.

Consensus Estimates for the Full Year Rise

Brokerage analysts only have consensus estimates for the full-year, not the quarter. Estimates for the year are up 17% to $13.08 from $11.99 in the last 30 days with 3 out of 5 covering analysts raising estimates.

Value Fundamentals

Posco's forward P/E is 9.06. It has a price-to-book (P/B) of 1.51, under the industry average of 2.05. The company has a strong five year average return on equity (ROE) of 17.98%. Additionally, PKX pays a dividend with a current yield of 2.70%.