Execution, steel prices key to rebound at Dofasco: management predicts improved financial and operating results far beyond analysts' estimates
Money Digest, Nov, 2002
Dofasco Inc., (TSX: DFS; Recent price: $27.35; Web site: www.dofasco.ca) is a fully integrated steel maker. The company specializes in a broad range of high quality flat rolled products.
Dofasco's products include hot and cold flat rolled steels, galvanized steel, prepainted steel, tinplate and chromium coated steels in coils, cut lengths and strips, welded pipe and tubular steels and laser-welded steel blanks.
The company serves major North American market sectors including automotive, construction, energy, manufacturing, container and steel distribution.
In addition to its own steel making and distribution capabilities, Dofasco holds interests in companies engaged in iron ore mining and processing. All this makes Dofasco an important player in the steel market.
Dofasco's management has indicated that it expects materially higher financial and operating results in the third quarter. The company expects third quarter earnings to be around $1.20, which is substantially above analysts' estimates. The company attributes its higher expectations to improved steel shipments and higher steel prices.
Analysts who follow the stock expect Dofasco results to show overall improvement including continued high sales volume and higher operating margins.
According to a recent Scotia Capital report, Dofasco is expected to earn $3.10 per share in 2002, up from $0.35 per share in 2001. It also has one-year target of $35.50 for the stock.
Dofasco's stock has already risen in anticipation of its earnings announcement on October 23,2002. By the time you read this, the results will have been announced. If the stock is still trading at current levels, Dofasco may be considered a candidate for your portfolio with a view to a medium-term gain.
Dofasco Inc. TSX Symbol DFS Recent Price $27.35 Price/Earnings 20.9 Price/Sales 0.7 Price/Book 1.2 Dividend Yield 4.0% Price/Cash Flow 7.5
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