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POSCO (PKX) Q2 Earnings Up Y/Y, Down Q/Q, '17 View Updated
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Korean steel producer POSCO (PKX - Free Report) reported improved year-over-year results for second-quarter 2017. Net income surged 139.8% to KRW 530 billion ($0.47 billion) from the year-ago quarter tally. The rise was primarily driven by revenue growth and improvement in margin profile of the company. Net earnings per share were KRW 1,518.6 or $1.35 per American Depository Receipt (ADR).
However, sequentially (or quarter over quarter) the company’s results were disappointing with net earnings falling roughly 45.8%. This was due to poor performance in the steel, E&C and Energy segments as well as fall in operating profit and share of loss of equity-accounted investees.
Revenues
In the quarter, POSCO’s revenues totaled KRW 14,944 billion ($13.3 billion). The top line improved 16.2% year over year but fell 0.9% sequentially.
Crude steel production decreased 3.1% to 8.8 million tons from 9.1 million tons in the previous quarter. Finished product sales declined 3% sequentially. The company noted that the fall in production and sales volume was primarily due to the revamping of blast furnaces at Pohang Works facility.
Margins
In the quarter, POSCO’s margin profile improved year over year on the back of healthy sales growth, partially offset by 15.8% rise in cost of sales.
As a percentage of total revenue, cost of sales was 87.5% compared with 87.8% in the year-ago quarter. Gross profit margin expanded 30 basis points (bps) to 12.5%. Selling and administrative expenses were flat at KRW 890 billion ($0.8 billion). Operating profit grew 44.2% year over year while operating margin was up 130 bps to 6.6%.
On a sequential basis, the company’s gross and operating margins fell 250 bps individually.
Balance Sheet
Exiting the second quarter, POSCO had cash balance of KRW 7,533 billion ($6.6 billion), down from KRW 7,821 billion ($7 billion) in the previous quarter. Non-current liabilities decreased 2.9% to KRW 13,671 billion ($12 billion).
Outlook
For 2017, POSCO anticipates consolidated revenues to be approximately KRW 59.3 trillion (up from earlier forecast of KRW 54.8 trillion). Finished product sales are estimated to be roughly 35.1 million tons (up from 34.6 million tons) while crude steel production is projected to be nearly 37 million tons. Consolidated investments are likely to be KRW 3.5 trillion.
Global steel demand worldwide is anticipated to grow 1.7% year over year on the back of demand expansion in China, India, U.S., European Nations, Southeast Asia and other emerging nations.
With a market capitalization of $23.6 billion, POSCO currently sports a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the industry include Ternium S.A. (TX - Free Report) , ArcelorMittal (MT - Free Report) and Gerdau S.A. (GGB - Free Report) . While Ternium sports the same Zacks Rank as POSCO, both ArcelorMittal and Gerdau carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Ternium delivered an average positive earnings surprise of 19.98% over the last four quarters. Its earnings estimates for 2017 were revised upward in the last 60 days.
ArcelorMittal’s earnings estimates for 2017 and 2018 improved over the past 30 days. It pulled of an average positive earnings surprise of 145.19% over the last four quarters.
Gerdau’s earnings estimates for 2017 improved over the past 60 days.
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POSCO (PKX) Q2 Earnings Up Y/Y, Down Q/Q, '17 View Updated
Korean steel producer POSCO (PKX - Free Report) reported improved year-over-year results for second-quarter 2017. Net income surged 139.8% to KRW 530 billion ($0.47 billion) from the year-ago quarter tally. The rise was primarily driven by revenue growth and improvement in margin profile of the company. Net earnings per share were KRW 1,518.6 or $1.35 per American Depository Receipt (ADR).
However, sequentially (or quarter over quarter) the company’s results were disappointing with net earnings falling roughly 45.8%. This was due to poor performance in the steel, E&C and Energy segments as well as fall in operating profit and share of loss of equity-accounted investees.
Revenues
In the quarter, POSCO’s revenues totaled KRW 14,944 billion ($13.3 billion). The top line improved 16.2% year over year but fell 0.9% sequentially.
Crude steel production decreased 3.1% to 8.8 million tons from 9.1 million tons in the previous quarter. Finished product sales declined 3% sequentially. The company noted that the fall in production and sales volume was primarily due to the revamping of blast furnaces at Pohang Works facility.
Margins
In the quarter, POSCO’s margin profile improved year over year on the back of healthy sales growth, partially offset by 15.8% rise in cost of sales.
As a percentage of total revenue, cost of sales was 87.5% compared with 87.8% in the year-ago quarter. Gross profit margin expanded 30 basis points (bps) to 12.5%. Selling and administrative expenses were flat at KRW 890 billion ($0.8 billion). Operating profit grew 44.2% year over year while operating margin was up 130 bps to 6.6%.
On a sequential basis, the company’s gross and operating margins fell 250 bps individually.
Balance Sheet
Exiting the second quarter, POSCO had cash balance of KRW 7,533 billion ($6.6 billion), down from KRW 7,821 billion ($7 billion) in the previous quarter. Non-current liabilities decreased 2.9% to KRW 13,671 billion ($12 billion).
Outlook
For 2017, POSCO anticipates consolidated revenues to be approximately KRW 59.3 trillion (up from earlier forecast of KRW 54.8 trillion). Finished product sales are estimated to be roughly 35.1 million tons (up from 34.6 million tons) while crude steel production is projected to be nearly 37 million tons. Consolidated investments are likely to be KRW 3.5 trillion.
Global steel demand worldwide is anticipated to grow 1.7% year over year on the back of demand expansion in China, India, U.S., European Nations, Southeast Asia and other emerging nations.
POSCO Price and Consensus
POSCO Price and Consensus | POSCO Quote
Zacks Rank & Key Picks
With a market capitalization of $23.6 billion, POSCO currently sports a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the industry include Ternium S.A. (TX - Free Report) , ArcelorMittal (MT - Free Report) and Gerdau S.A. (GGB - Free Report) . While Ternium sports the same Zacks Rank as POSCO, both ArcelorMittal and Gerdau carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Ternium delivered an average positive earnings surprise of 19.98% over the last four quarters. Its earnings estimates for 2017 were revised upward in the last 60 days.
ArcelorMittal’s earnings estimates for 2017 and 2018 improved over the past 30 days. It pulled of an average positive earnings surprise of 145.19% over the last four quarters.
Gerdau’s earnings estimates for 2017 improved over the past 60 days.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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