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Zacks Investment Research upgraded Sutor Technology Group Limited to a Zacks Rank #1 (Strong Buy) on Mar 20, 2013.

Why the Upgrade?

Sutor Technology’s financial results for the second quarter of fiscal 2013 (ended Dec 31, 2012) as announced on Feb 7, 2013 were impressive. The company reported earnings per share of 12 cents, up 71.4% year over year and double the Zacks Consensus Estimate of 6 cents per share.

Revenue improved 46.3% year over year to $157.9 million as the company leveraged benefits from new products and service offerings to a more diversified customer base. Volumes sold improved while average selling price was a little weak. Higher proportion of low-margin products in the quarter pressured gross margin that went down 190 basis points.

Operating margin in the quarter went down by 40 basis points, due primarily to lower gross margins, offset slightly by lower proportion of operating expenses as a percentage of revenue.

Three out of four quarters of positive earnings surprise with the average being 47.6%, raises optimism for a better financial performance ahead for Sutor Technology. Following the second quarter results, in the last 60 days, the Zacks Consensus Estimate for fiscal 2013 has gone up by 40.9% to 31 cents while that for fiscal 2014 went up 7.7% to 42 cents.

Other Stocks to Consider

Sutor Technology is one of the leading manufacturers and suppliers of steel products in China. The company currently has a market capitalization of $71.7 million. Other stocks worth a look at in the industry are Companhia Siderurgica Nacional (SID - Analyst Report), Gerdau S.A. (GGB - Analyst Report) and POSCO (PKX - Analyst Report).

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