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Bull of the Day: Schnitzer Steel (SCHN)

David Bartosiak

The market’s knee-jerk reaction to COVID was to sell off everything. It didn’t matter what your business was, when investors pulled money from the market, stock prices were hit…hard. Once the market bottomed, there was a noticeable flight towards tech stocks. Recently, a new phenomenon has been occurring. There’s been money flowing into more traditional industrial industries. One such beneficiary of these new found fund flows is today’s Bull of the Day.

Today’s Bull of the Day is Zacks Rank #1 (Strong Buy) Schnitzer Steel (SCHN). Schnitzer Steel Industries, collects, processes and recycles metals by operating one of the largest metals recycling businesses in the United States. They also manufacture finished steel products at their technologically advanced steel mini-mill.

The reason behind the favorable Zacks Rank is simple. Analysts all over Wall Street have been increasing their earnings estimates. Analysts were very bearish on the stock as recently as 30 days ago, but have dramatically changed their tune over the last week. The current year Zacks Consensus estimate reached as low as an 18-cent loss. Since then, the consensus number has shot up to a 5-cent profit. Next year’s Zacks Consensus Estimate has taken a similar path. After bottoming out at 22-cents sixty days ago, next year’s Zacks Consensus Estimate has now risen to a profit of 57 cents.

Schnitzer Steel Industries, Inc. Price and Consensus

Schnitzer Steel Industries, Inc. Price and Consensus

Schnitzer Steel Industries, Inc. price-consensus-chart | Schnitzer Steel Industries, Inc. Quote

While the EPS number looks a lot better next year, the revenue growth is not as appealing. Current year sales estimates call for a contraction of 27.69%. Next year the forecast calls for a return to growth. That may seem great for a company which just experienced a serious contraction but it’s only slated to come in at a paltry 1.87%. That is something to keep in mind for the more cautious investor.

Earnings estimates have rounded off over the last several months. That’s a welcome reversal of a negative trend which began in mid-2018. Back then, shares were trading north of $35. The stock is now trading at half of that price. Should this earnings rebound continue, the upside potential could far outweigh the risks of the current year slowdown in sales.

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