We recently reiterated our Neutral recommendation on Brazilian
Companhia Siderurgica Nacional
), or CSN as optimism arising from the company's long-term growth
prospects get marred by near-term concerns.
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CIA SIDERUR-ADR (SID): Free Stock Analysis
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Considering the long-term growth prospects, we find SID, a $7.5
billion company, one of the best steelmakers in Brazil. SID seems
well equipped to leverage benefits from the growing steel market
in the domestic as well as the international arena. As projected
by the World Steel Association, the apparent global steel
consumption is expected to increase 3.2% in 2013.
Reviving global economy has also boosted demand for better
infrastructure and agricultural needs, in turn, it has also
increased demand for steel worldwide. Talking of Brazil, future
of steel industry is bright here, especially when the country is
gearing up to host two major sporting events; the 2014 Soccer
World Cup and 2016 Olympic Games. Moreover, rising demand from
the manufacturing and construction industries and infrastructure
investments induced by a rise in government spending are added
benefits for the industry as well as SID.
Despite these positives, near-term concerns and financial
performances keep us on the sidelines. Third quarter 2012 results
of SID failed to gain enough momentum on a year-over-year basis
as net earnings fell roughly 85% in the quarter. Moreover, a 23%
increase in the cost of sales offset a mere 0.6% rise in revenue
that led to a 14% fall in gross margin. Moreover, the prevailing
weakness in the European market, slow growth in China and
sluggish growth in the United States are impacting the worldwide
Others Stocks to Consider
Other stocks to watch out for are
Shiloh Industries Inc.
) with a Zacks Rank #1 (Strong Buy) along with
Kobe Steel Ltd.
Nippon Steel & Sumitomo Metal Corporation
), both holding a Zacks Rank #2 (Buy).