Wednesday, July 1, 2015

Worthington Industries' Future Is Looking Better, But It's Not A Buy Yet

This article was first published by Seeking Alpha on July 1, 2015

By Sarfaraz A. Khan

Summary: Worthington Industries has a great business model, but it is at the mercy of the market. The company’s top and bottom-line is shrinking due to weakness in the macro environment. The future outlook of steel processing is looking better, but the other two segments might continue to struggle.

Worthington Industries, one of North America's leading steel processors and the world's biggest supplier of pressure tanks and cylinders, has a solid business model. Thanks to a diverse customer base, the Columbus, Ohio-based company does not rely on any single sector for most of its revenues. But there's little the company can do in the face of weakness in prices of various commodities and sluggish economic growth.

Earnings Recap

As per the recently announced fourth quarter results, Worthington gets 63% of its revenues from steel processing segment in which the company provides its products to automakers, including General Motors (NYSE:GM), Ford (NYSE:F) and Chrysler. Nearly 30% of the revenues come from the pressure cylinders segment in which Worthington primarily serves the energy industry. Most of the remaining revenues come from the engineered cabs division.

During the quarter, Worthington's net sales dropped by 5.1% from last year to $846 million while its operating income dropped by 15.8% to $27.2 million. Net profit dropped by 13% from last year to $28.9 million. Excluding the impact of one-off items, adjusted earnings clocked in at $0.53 per share. The company managed to beat both top and bottom line estimates of a profit of ….. read full article at Seeking Alpha