Olympic Steel, Inc.

Olympic Steel announced a $1 special dividend as the steel sector remains hot. The company easily surprised on estimates for the second quarter by 58.82% and has beaten 2 out of the last 4 quarters on average of 11.52%. Olympic Steel has a forward P/E of 8.87.

Company Description

Olympic Steel, Inc. (ZEUS - Snapshot Report) distributes processed carbon, coated and stainless flat-rolled sheet, and coil and plate steel products in the United States.

ZEUS, a Zacks #1 Rank (Strong Buy), operates as an intermediary between steel producers and manufacturers that require processed steel for their operations. ZEUS operates 16 facilities across North America, predominantly in the Midwest.

Olympic Steel Reports a Record Second Quarter

On July 31, Olympic Steel reported record second quarter earnings that beat Wall Street estimates by $1.00 per share. Net income was $29.6 million, or $2.70 per share, compared to $9.4 million, or 88 cents per share, a year ago. Analysts expected only $1.70 per share.

Sales jumped 31% to $363.5 million from $277.4 million in the second quarter of 2007. Sales were hot for the entire first half of the year, rising 18.9% compared to the first half of 2007.

Volumes rose, as tons sold increased 5.1% to 353 thousand from 336 thousand in the year ago period.

Outlook Is Cautious

Despite the record second quarter, the company was cautiously optimistic.

ZEUS said its outlook remained favorable. The company stated it was positioned to perform well through the seasonally slow third quarter sales period.

ZEUS to Pay $1 Per Share Special Dividend

On July 31, Olympic Steel announced it will pay a $1 special dividend payable on Sep 15 to shareholders of record as of Sep 1.

The company also raised its regular quarterly dividend by 1 cent to 5 cents per share from 4 cents. It is also payable on Sep 15 to shareholders of record on Sep 1.

"Given the company's strong balance sheet and cash flows, its ongoing increased capital spending initiatives, and the company's commitment to growth, it was deemed appropriate to reward shareholders at this time," said CEO Michael D. Siegal.

Estimates Rise Sharply for the Third Quarter and Full Year

Responding to the record second quarter, covering analysts have been raising estimates for the third quarter and the full year. For the third quarter, estimates jumped 26 cents to $1.68 from $1.42 per share in the last month.

For the full year, estimates climbed 14.7% in the last 30 days to $6.18 from $5.39 per share.

Value Fundamentals

Olympic Steel continues to have strong fundamentals. It currently trades at only 8.8x forward earnings. Its price-to-book (P/B) is 1.70, under the industry average of 1.98. The company has a solid five year average return on equity (ROE) of 16.55%.