Goldman Sachs (NYSE:GS) said in a research report that they're lowering their earnings per share estimate for Schnitzer Steel Industries (NASDAQ:SCHN), although their reiterated their "Neutral" rating on the company.
Analysts at Goldman said, “SCHN reported EPS from continuing operations of $1.43 per diluted share for its 3QFY2010 (ending May 30), above our estimate of $0.99 and the consensus estimate of $0.87. However, we expect lower scrap prices and decline in steel demand to have a significant negative impact in 4Q and are thus lowering our FY 4Q2010 estimates to $0.38 from $1.01. Our full year fiscal 2010 estimate is now $2.67, down from $2.85 earlier. We have made no changes to our FY 2011/2012/normalized estimates. Our P/E, EV/EBITDA, P/B and M&A based 6-month target price remains at $60 and we maintain our Neutral rating on SCHN.”
Concerning the long-term prospects of the company, Goldman analysts said this, “Although we maintain our Neutral rating on the stock as we see current weakness in scrap and steel prices to weigh in on the stock in the near-term, we do like the scrap fundamentals as supply is limited and demand should continue to increase as global steel production rises over coming years. Additionally emerging markets would be the main driver of incremental demand which should benefits companies like Schnitzer with coastal locations. We also like its vertically integrated model allowing the company to partially source its raw scrap from its own auto parts division.”
Goldman has a $60 price target on Schnitzer.
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