We recently upgraded Korean steel producer,
) from Neutral to an Outperform recommendation based on the
company's long-term growth prospects. The $6.2 billion company is
the world's third largest steelmaker on the basis of output.
The company was incorporated in 1968 and is headquartered in
Seoul, Korea. Ever since its inception, the company has been
earning the reputation of producing the best quality steel and
steel products through 143 companies out of its total 202
companies operating across the world.
The company recently came out with its third quarter 2012
financial results, which were quite impressive as earnings per
ADR came in at US$1.84, way above the Zacks Consensus Estimate of
US$1.45. Total revenue, however, plummeted 7% in the quarter as
weakness in the company's steel business overshadowed its healthy
performance in the non-steel businesses. Margins plummeted as
costs soared high while debts were lower leading to lower
Leaving aside the financial performance, we find POSCO's
expansionary efforts in the domestic market as well as in the
international arena, especially the fast growing and emerging
markets worldwide, quite remarkable.
Moreover, higher proportion of value-added products like
cold-rolled steel, automotive steel plates and electric steel
sheets in its product mix work in favour of the company. Also,
the company has been increasing the use of cheaper raw material
and reduced purchased-energy costs with an emphasis on cost
saving which amounted to KRW 1,071 billion in 2012.
These long-term prospects get a bit marred by near-term
concerns including rising costs and expenses as well as the
impact of the financial crisis in the European region, slow
growth in China and sluggish growth in the United States on the
worldwide steel demand.
The stock currently has a Zacks #3 Rank, implying a short-term
Hold rating while its nearest competitor
) bears a Zacks #5 (Strong Sell) Rank.
ARCELOR MITTAL (MT): Free Stock Analysis
POSCO-ADR (PKX): Free Stock Analysis Report
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