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Zacks Investment Research upgraded Companhia Siderurgica Nacional (SID - Analyst Report), or CSN to a Zacks Rank #1 (Strong Buy) on Sep 10, 2013.

Why the Upgrade?

Prospects are bright for the steel industry worldwide as impacts emanating from the Eurozone crisis and instability in the U.S. and China have abated, gradually creating more room for growth. This, in turn, correlates to demand for better infrastructure and modernized farming techniques, which require steel. According to the World Steel Association’s projection in Apr 2013, estimated global consumption of steel is likely to grow 2.9% in 2013 and 3.2% in 2014.

Talking of one of the important emerging markets, Brazil, steel demand is on the rise as the country prepares to host major sporting events in the coming years. Major investments in infrastructure are being planned for the development of ports, railroads, airports, wind farms and roads, among others.

According to the Brazilian Steel Institute (IABr), crude steel production is likely to increase 5.8% in 2013 coupled with steel sales rising by 7.6% in the year. We believe the Brazilian steel companies, including Gerdau and SID, among others, are well positioned to leverage the rising wave of infrastructural requirements and are also expected to keep up with the demand growth in the short-to-medium term.

Also, SID’s exposure to iron ore mining, cement, and infrastructure projects makes it an attractive stock to own. In the first half 2013, mining sales contributed nearly 22.5% of consolidated revenues. The company has investment plans to increase the annual production capacity of the Casa de Pedra mine to 50 million by 2014. The whole mining sector of SID is likely to produce 89 million tons of iron ore per year by 2014.

Talking of SID’s financial background, the company reported an impressive second quarter 2013 results with an earnings surprise of 433.3%. Average earnings surprise of the trailing four quarters is 183.3%. Additionally, we have an Earnings ESP of 360% for 2013 and 160% for 2014.

In the last 30 days, the Zacks Consensus Estimate for SID has gone up from a loss per share of 6 cents to earnings per share of 5 cents for 2013 while the consensus estimate for 2014 increased by 400%.

Others Stocks to Consider

SID currently has a market capitalization of roughly $6.2 billion. Other stocks to watch out for in the industry are Nippon Steel & Sumitomo Metal Corporation (NSSMY), with a Zacks Rank #1 (Strong Buy) while Ternium S.A. (TX - Snapshot Report) and Gerdau S.A. (GGB - Analyst Report), each come with a Zacks Rank #2 (Buy).

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