Schnitzer Warning… More Steel Sector Pain Ahead? (SCHN, AKS, X)

By Jon C. Ogg Updated Apr 28, 4:28AM EDT · Published Dec 19, 8:53AM EST

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Schnitzer Steel Industries, Inc. (NASDAQ: SCHN) is set to report earnings on January 9, 2012, but the company has already telegraphed that the results will be a stinker. It has lowered guidance “to reflect the impact of significant market volatility during the quarter… due to weaker than anticipated global market conditions for recycled metals.”

Operating margins contracted more than anticipated during the quarter and earnings are expected to be in the range of $0.18 to $0.25 EPS for its fourth quarter. Unfortunately, Thomson Reuters had estimates at $0.55 EPS. The company further cited higher fears of a global recession, mostly from the European debt crisis, being responsible for a significant buying pattern slowdown as well as a sharp decline in sales prices.

Operating income in the Metals Recycling Business per ferrous ton is expected to be approximately 50% lower than the $21 per ton seen during the first quarter of 2011, while the Auto Parts Business is going to see operating income about 30% lower.

The only good news is that Schnitzer did note, “Sales prices began to strengthen towards the end of the quarter, but the improvements are not expected to benefit results until later in the second quarter.”

Schnitzer had already lost more than one-third of its value from the 2011 high. Now shares are down almost 6% at $43.10 versus a 52-week range of $37.00 to $69.43.

United States Steel Corporation (NYSE: X) is actually up almost 1% at $26.11 and AK Steel Holding Corporation (NYSE: AKS) is up 1.7% at $7.65 in early trading.

JON C. OGG

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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.