Zacks Investment Research upgraded shares of POSCO (PKX) from NEUTRAL to OUTPERFORM on December 14, 2012, with a target price of $96.00.
POSCO's 3Q12 results were impressive as EPADR of US$1.84 came in much above the Zacks Consensus Estimate of US$1.45. Weakness in the steel business was, to some extent, offset by satisfactory performance in the non-steel businesses although overall total revenue plummeted 7% in the quarter. Cost of sales soared as a percentage of revenue while operating margin declined 90 basis points year over year. Debts were lower in the quarter leading to lower debt-equity ratio. By and large, apart from these issues, it's the company's long-term growth prospects that has induced us to upgrade our recommendation to Outperform. We believe that POSCO is well placed to benefit from wide regional diversifications, higher proportion of value-added products in the product mix and new facility additions. Moreover, its focus on expansion in the fast growing markets and investments in raw materials will be added advantage going forward.
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