Zacks Investment Research downgraded shares of POSCO (PKX) from OUTPERFORM to NEUTRAL on May 27, 2013, with a target price of $75.00.
We have downgraded POSCO from Outperform to Neutral recommendation. POSCO's 1Q13 financial results were quite disappointing. Net income in the quarter fell 54% y/y largely due to an impact from impairment losses on holding securities. Revenues also plummeted 10.6% owing to weak steel sector performance. Both crude steel production and finished product sales declined. Talking of margins, gross margin rose few basis points as cost of sales slipped while operating margin gained despite a slight increase in selling expenses. Debts were higher in the quarter, leading to a rise in the debt-equity ratio. Management lowered its consolidated revenue guidance for 2013 from KRW 66 trillion to KRW 64 trillion. Also, we are concerned about factors including risks emanating from rising international exposure, increasing costs and competitive forces.
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