Shares of Worthington Industries (WOR) took a hammering yesterday after the metals processor said that its earnings for third-quarter fiscal 2015 will be considerably below than what was witnessed a year ago due to a significant slump in steel pricing and soft demand across a few major end-use markets.
Lower pricing and weak demand are also expected to unfavorably affect results in the fourth quarter. Worthington is faced with weak demand across a few markets including agriculture and oil and gas. Moreover, the company expects its results to be hurt by higher-than-normal operating costs in certain operations across its Pressure Cylinders and Engineered Cabs divisions.
Worthington added that these headwinds might prevent it from achieving year-over-year earnings growth in fiscal 2015. Analysts polled by Zacks are currently expecting earnings of 58 cents per share and $2.34 per share for the third quarter and fiscal 2015, respectively, on an average.
Worthington noted that steel prices have declined more than $100 a ton since mid-Dec 2014. However, the company did not anticipate the amount and speed of the fall. Steel prices have been pressurized by continued weakness in the global economy.
Shares of Worthington slid around 13% yesterday to close the day at $26.59. The stock is down roughly 12% so far this year and 29% over a year.
Worthington also said that it remains committed to repurchase shares. It expects to buyback shares worth up to $60 million through Apr 9, 2015, under the “Rule 10b5-1 Plan” unless the plan it terminated earlier pursuant to terms.
Worthington will review its third-quarter results during its earnings call on Mar 26.
Worthington’s adjusted earnings of 55 cents per share for second-quarter fiscal 2015 (ended Nov 30, 2014) missed the Zacks Consensus Estimate of 68 cents.
Revenues rose 13% year over year to $871 million on higher volumes in the Steel Processing division and contributions from recent acquisitions in the Pressure Cylinders unit. It came ahead of the Zacks Consensus Estimate of $867 million. Gross margin, however, fell due to higher manufacturing costs.
Worthington currently holds a Zacks Rank #4 (Sell).
Better-ranked steel and metals companies include Norsk Hydro ASA (NHYDY), Noranda Aluminum Holding Corp. (NOR) and NSK Ltd. (NPSKY). While Norsk Hydro retains a Zacks Rank #1 (Strong Buy), both Noranda and NSK hold a Zacks Rank #2 (Buy).
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