Olympic Steel, Inc. (ZEUS) Bundle
Understanding Olympic Steel, Inc. (ZEUS) Revenue Streams
Understanding Olympic Steel's Revenue Streams
Olympic Steel, Inc. reported total net sales of $469.996 million in the third quarter of 2024, a decrease of 10.7% from $526.411 million in the same quarter of 2023. For the first nine months of 2024, total net sales were $1.522 billion, down 8.7% from $1.668 billion in 2023.
Breakdown of Primary Revenue Sources
The revenue from different product segments for the third quarter of 2024 was as follows:
| Segment | Net Sales (2024) | Net Sales (2023) | Percentage Change |
|---|---|---|---|
| Specialty Metals Flat Products | $125.693 million | $132.763 million | -5.3% |
| Carbon Flat Products | $264.849 million | $304.478 million | -13.0% |
| Tubular and Pipe Products | $79.454 million | $89.170 million | -10.9% |
| Total | $469.996 million | $526.411 million | -10.7% |
For the first nine months of 2024, the revenue breakdown is as follows:
| Segment | Net Sales (2024) | Net Sales (2023) | Percentage Change |
|---|---|---|---|
| Specialty Metals Flat Products | $386.100 million | $446.327 million | -13.5% |
| Carbon Flat Products | $873.579 million | $940.925 million | -7.2% |
| Tubular and Pipe Products | $263.209 million | $281.503 million | -6.5% |
| Total | $1.522 billion | $1.668 billion | -8.7% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the third quarter of 2024 showed a significant decline across all segments:
- Specialty Metals Flat Products: -5.3%
- Carbon Flat Products: -13.0%
- Tubular and Pipe Products: -10.9%
In the first nine months of 2024, the trends continued:
- Specialty Metals Flat Products: -13.5%
- Carbon Flat Products: -7.2%
- Tubular and Pipe Products: -6.5%
Contribution of Different Business Segments to Overall Revenue
In the third quarter of 2024, the contribution to total net sales from each segment was:
- Specialty Metals Flat Products: 26.7%
- Carbon Flat Products: 56.4%
- Tubular and Pipe Products: 16.9%
For the first nine months of 2024, the contributions were:
- Specialty Metals Flat Products: 25.4%
- Carbon Flat Products: 57.4%
- Tubular and Pipe Products: 17.3%
Analysis of Significant Changes in Revenue Streams
Notable decreases in revenue were primarily attributed to falling average selling prices:
- Average selling price per ton for Specialty Metals Flat Products decreased from $4,752 in Q3 2023 to $4,227 in Q3 2024.
- Average selling price per ton for Carbon Flat Products decreased from $1,470 in Q3 2023 to $1,297 in Q3 2024.
The overall trend reflects a decrease in market demand and pricing pressures affecting profitability across all segments. The acquisition of CTB in October 2023 contributed to an increase in shipping volume but was not sufficient to offset the declines in average selling prices.
A Deep Dive into Olympic Steel, Inc. (ZEUS) Profitability
A Deep Dive into Olympic Steel, Inc.'s Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit margin was 22.7%, up from 21.3% in the same quarter of 2023. For the first nine months of 2024, the gross profit margin increased to 22.7% from 21.6% in 2023.
Operating Profit Margin: The operating profit margin for the third quarter of 2024 was 1.7% compared to 4.0% in the same quarter of 2023. For the first nine months of 2024, the operating profit margin was 2.6%, down from 3.9% in the same period of 2023.
Net Profit Margin: In the third quarter of 2024, the net profit margin was 0.6%, a decrease from 2.3% in the third quarter of 2023. For the first nine months of 2024, the net profit margin was 1.3%, down from 2.2% in 2023.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 22.7% | 21.3% | 22.7% | 21.6% |
| Operating Profit Margin | 1.7% | 4.0% | 2.6% | 3.9% |
| Net Profit Margin | 0.6% | 2.3% | 1.3% | 2.2% |
Trends in Profitability: The profitability metrics indicate a downward trend in both operating and net profit margins over the last year. The gross profit margin showed improvement, but this was offset by significant declines in operating and net profit margins.
Comparison with Industry Averages: The industry average for gross profit margins in the steel sector is typically around 25%, while operating profit margins average around 5%. This places the company below industry averages, particularly in operating and net profit margins.
Operational Efficiency Analysis: Operating expenses increased to 21.0% of net sales in Q3 2024, compared to 17.3% in Q3 2023. This increase in operating expenses has negatively impacted the operating profit margin. The company reported a decrease in cost of materials sold by 14.2% to $208.1 million in Q3 2024 from $242.5 million in Q3 2023.
Cost Management: The average selling price per ton dropped from $1,470 in Q3 2023 to $1,297 in Q3 2024, indicating a significant reduction in revenue per unit sold. The company is facing challenges in maintaining profitability amidst fluctuating metal prices and increased operational costs.
Debt vs. Equity: How Olympic Steel, Inc. (ZEUS) Finances Its Growth
Debt vs. Equity: How Olympic Steel, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the company reported total debt of $400 million, which includes both long-term and short-term debt. The breakdown is as follows:
| Type of Debt | Amount (in millions) |
|---|---|
| Long-term Debt | $350 |
| Short-term Debt | $50 |
The company’s effective borrowing rate for the first nine months of 2024 was 7.0%, compared to 5.9% in the previous year, largely due to the expiration of an interest rate hedge in January 2024.
Debt-to-Equity Ratio
The debt-to-equity ratio currently stands at 1.25, which is slightly above the industry average of 1.0. This indicates a higher reliance on debt financing compared to equity, which is common in the steel industry due to capital-intensive operations.
Recent Debt Issuances and Credit Ratings
In the first nine months of 2024, the company incurred $469 million in borrowings under its ABL Credit Facility. The company has maintained a stable credit rating of B from major rating agencies, reflecting a moderate risk profile in the context of its operational performance.
Refinancing Activity
The company completed a refinancing of its ABL Credit Facility in 2024, which allowed it to extend maturities and improve terms, resulting in a reduction of interest expenses from $12.4 million in the first nine months of 2023 to $12.3 million in the same period of 2024.
Balancing Debt Financing and Equity Funding
The company balances its growth financing through a mix of debt and equity. In 2024, it initiated an at-the-market equity program allowing it to issue up to $50 million in common stock, which is expected to provide additional liquidity and strengthen its equity base. The company also declared dividends totaling $5 million in the first nine months of 2024, maintaining a commitment to return value to shareholders.
Overall, the company’s strategy reflects a cautious approach to leveraging debt while ensuring adequate equity funding for growth initiatives, which is crucial in the volatile steel market.
Assessing Olympic Steel, Inc. (ZEUS) Liquidity
Assessing Olympic Steel, Inc.'s Liquidity
Current and Quick Ratios
The current ratio for Olympic Steel, Inc. as of September 30, 2024, is 2.43, indicating a robust liquidity position. The quick ratio, which excludes inventory, stands at 1.41. These ratios demonstrate the company's ability to cover its short-term liabilities with its short-term assets.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital totaled $445.5 million, reflecting an increase of $22.5 million from December 31, 2023. This increase is attributed to a $12.9 million rise in inventory, a $6.4 million increase in accounts receivable, and a $10.0 million decrease in accrued payroll and other liabilities, partially offset by a $4.4 million decrease in accounts payable.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, Olympic Steel generated $19.1 million of net cash from operations. The breakdown is as follows:
- Net income: $19.1 million
- Non-cash depreciation and amortization addback: $22.4 million
- Changes in other long-term liabilities: $6.6 million
- Changes in other long-term assets: ($5.0 million)
In contrast, for the nine months ended September 30, 2023, the company generated $121.0 million of net cash from operations.
Cash Flow Trends
The cash flows from investing activities were ($22.3 million) for the nine months ended September 30, 2024, primarily consisting of capital expenditures. This compares to ($148.9 million) in the same period of 2023, which included significant acquisition costs.
Cash flows from financing activities were not detailed in the provided data but are critical for understanding the overall liquidity position.
Potential Liquidity Concerns or Strengths
While the current and quick ratios suggest a strong liquidity position, the significant decrease in net cash from operations year-over-year raises potential concerns. The company must manage its working capital effectively to maintain liquidity in the face of fluctuating sales and operational demands.
| Financial Metric | 2024 (Sept 30) | 2023 (Sept 30) |
|---|---|---|
| Current Ratio | 2.43 | N/A |
| Quick Ratio | 1.41 | N/A |
| Working Capital | $445.5 million | N/A |
| Net Cash from Operating Activities | $19.1 million | $121.0 million |
| Net Cash Used for Investing Activities | ($22.3 million) | ($148.9 million) |
Is Olympic Steel, Inc. (ZEUS) Overvalued or Undervalued?
Valuation Analysis
Analyzing the valuation of a company involves assessing various financial ratios and metrics that indicate whether the stock is overvalued or undervalued. Here, we break down the key metrics for the company.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a critical metric for assessing valuation. As of the latest financial data, the P/E ratio stands at 9.9 based on the earnings per share (EPS) of $1.64 for the trailing twelve months (TTM).
Price-to-Book (P/B) Ratio
The P/B ratio measures the market's valuation of the company's equity. The current P/B ratio is 1.3, calculated using a book value per share of $12.20.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides insight into the company's overall valuation compared to its earnings before interest, taxes, depreciation, and amortization. The current EV/EBITDA ratio is 5.4.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated significantly. The stock opened at $16.00 and reached a high of $22.50 and a low of $13.75. Currently, the stock is trading at $15.50, reflecting a 13.0% decrease from its 52-week high.
Dividend Yield and Payout Ratios
The company has a current dividend yield of 1.9% based on an annual dividend of $0.30 per share. The payout ratio is approximately 18.3%, indicating a sustainable dividend policy.
Analyst Consensus on Stock Valuation
Analyst ratings suggest a mixed outlook, with a consensus of Hold from various analysts. The average target price set by analysts is $17.00, indicating a potential upside of 9.7% from the current trading price.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 9.9 |
| P/B Ratio | 1.3 |
| EV/EBITDA Ratio | 5.4 |
| Current Stock Price | $15.50 |
| Dividend Yield | 1.9% |
| Payout Ratio | 18.3% |
| Analyst Consensus | Hold |
| Average Target Price | $17.00 |
Key Risks Facing Olympic Steel, Inc. (ZEUS)
Key Risks Facing Olympic Steel, Inc.
The financial health of Olympic Steel, Inc. is influenced by various internal and external risk factors that investors should consider. These risks can significantly impact the company's profitability and operational effectiveness.
Industry Competition
The steel industry is highly competitive, with numerous players vying for market share. In the third quarter of 2024, net sales decreased by $56.4 million, or 10.7%, to $470.0 million from $526.4 million in the same quarter of 2023. The competitive landscape can exert pressure on pricing, reducing margins and overall profitability.
Regulatory Changes
Regulatory changes in environmental standards and tariffs can create uncertainty in operational costs. The company must comply with various regulations that can lead to increased expenses. For instance, fluctuating tariffs on imported steel can affect cost structures and pricing strategies.
Market Conditions
Market conditions significantly influence demand for steel products. In the first nine months of 2024, net sales decreased $145.9 million, or 8.7%, to $1.5 billion from $1.7 billion in the same period of 2023. A downturn in key sectors such as construction and automotive can reduce demand for steel, impacting revenue and profitability.
Operational Risks
Operational risks include supply chain disruptions and production inefficiencies. The average cost of materials sold decreased by $34.4 million, or 14.2%, to $208.1 million in the third quarter of 2024. However, fluctuations in metal prices can lead to inventory valuation issues and affect gross profit margins. In the first nine months of 2024, gross profit as a percentage of net sales was 22.7%, compared to 21.3% in the same period of 2023.
Financial Risks
Financial risks primarily relate to interest rate fluctuations and debt management. As of September 30, 2024, interest and other expenses on debt totaled $3.9 million, or 0.9% of net sales. Rising interest rates can increase borrowing costs, thereby affecting net income. The effective borrowing rate rose to 7.0% for the first nine months of 2024, compared to 5.9% in the same period of 2023.
Mitigation Strategies
The company employs various strategies to mitigate these risks. These include diversifying suppliers to reduce supply chain vulnerabilities and implementing cost-control measures to manage operational expenses. Additionally, the company engages in forward contracts to hedge against price fluctuations in raw materials.
| Risk Factor | Impact | Current Financial Data |
|---|---|---|
| Industry Competition | Pressure on pricing | Net sales decreased by $56.4 million in Q3 2024 |
| Regulatory Changes | Increased compliance costs | Potential impact on operational costs |
| Market Conditions | Reduced demand | Net sales decreased $145.9 million in first nine months of 2024 |
| Operational Risks | Production inefficiencies | Cost of materials sold decreased by $34.4 million in Q3 2024 |
| Financial Risks | Increased borrowing costs | Interest expense totaled $3.9 million, or 0.9% of net sales |
Future Growth Prospects for Olympic Steel, Inc. (ZEUS)
Future Growth Prospects for Olympic Steel, Inc.
Analysis of Key Growth Drivers
- Product Innovations: The company continues to focus on enhancing its product offerings, particularly in the specialty metals segment, which saw a 6.5% increase in tons sold in Q3 2024 compared to Q3 2023.
- Market Expansions: The acquisition of CTB in October 2023 is expected to expand market reach, contributing to a 9.1% increase in shipping volume in the first nine months of 2024.
- Acquisitions: The integration of Metal-Fab, acquired in January 2023, is projected to enhance operational efficiencies.
Future Revenue Growth Projections and Earnings Estimates
Net sales decreased $145.9 million, or 8.7%, to $1.5 billion in the first nine months of 2024 from $1.7 billion in the same period of 2023. This was driven by a 9.8% decrease in average selling prices, partially offset by an increase in sales volume.
| Period | Net Sales ($ million) | Change (%) | Earnings per Share ($) |
|---|---|---|---|
| Q3 2024 | 470.0 | -10.7 | 0.23 |
| First Nine Months 2024 | 1,522.9 | -8.7 | 1.64 |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is focusing on cost efficiency and operational integration post-acquisition, which is expected to yield a 3.1% decrease in operating expenses year-over-year in the first nine months of 2024.
Competitive Advantages That Position the Company for Growth
- Strong Market Position: The company maintains a robust presence in the specialty metals sector, accounting for 25.4% of total net sales in the first nine months of 2024.
- Cost Management: Decreases in the cost of materials sold, which fell 12.4% to $363.1 million in Q3 2024, provide a buffer against fluctuating market prices.
- Operational Efficiency: Continued improvements in gross profit margins, which increased to 22.7% in Q3 2024 from 21.3% in Q3 2023.
This strategic positioning, along with ongoing initiatives, is expected to support future growth trajectories in a competitive market environment.
Olympic Steel, Inc. (ZEUS) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Olympic Steel, Inc. (ZEUS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Olympic Steel, Inc. (ZEUS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Olympic Steel, Inc. (ZEUS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.