On Dec 5, we reiterated our Neutral recommendation on steel
pipe and tube company
Valmont Industries, Inc.
). While the company should gain from strong demand environment
across utility and irrigation markets, we take a cautious stance
factoring in weakness across lighting and traffic markets in
North America and a still challenging operating backdrop in
Valmont posted lower-than-expected third-quarter 2013 results
on Oct 17 with both revenues and adjusted earnings missing Zacks
Consensus Estimates. Profit was essentially flat year over year
as higher sales were offset by an increase in tax expenses. The
company envisions sustained improvement in utility support and
engineered infrastructure support businesses.
Valmont, a Zacks Rank #3 (Hold) stock, is witnessing
significant strength across the utility and irrigation markets.
In the Irrigation segment, improving North American equipment
demand and higher farm income is boosting sales and
profitability. Moreover, the global transmission and distribution
markets are seen as major long-term growth opportunities in the
In addition, Valmont is actively pursuing capacity expansion
through new constructions and extension of existing facilities to
meet the increasing demand from utility customers in North
However, Valmont remains affected by a challenging operating
backdrop in Europe. In its Engineered Infrastructure Products
division, weak government infrastructural funding is hurting
lighting and traffic product markets across North America and
Valmont is also exposed to volatility in raw material costs.
Higher prices for key raw materials such as steel, aluminum and
zinc, along with their reduced availability, may raise the
company's operating costs and reduce its profitability.
Other Stocks to Consider
Other companies in the steel and related industries with
favorable Zacks Rank are
Companhia Siderurgica Nacional
United States Steel Corp.
Worthington Industries, Inc.
). While Companhia Siderurgica maintains a Zacks Rank #1 (Strong
Buy), both United States Steel and Worthington Industries hold a
Zacks Rank #2 (Buy).
CIA SIDERUR-ADR (SID): Free Stock Analysis
VALMONT INDS (VMI): Free Stock Analysis
WORTHINGTON IND (WOR): Free Stock Analysis
UTD STATES STL (X): Free Stock Analysis
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