Schnitzer Steel (SCHN) Prelim. Q4 EPS Tops Views

Schnitzer Steel (NASDAQ: SCHN) will report the financial results for its fourth quarter and fiscal year ended August 31, 2014, on Tuesday, October 28, 2014, and will webcast a conference call to discuss the performance at 11:30 a.m. Eastern on the same day. In advance of its full earnings release, Schnitzer is providing preliminary results for its fourth quarter of fiscal 2014.

Schnitzer expects fourth quarter of fiscal 2014 adjusted earnings per share from continuing operations to be in the range of $0.28 - $0.32, excluding restructuring and other asset impairment charges, and associated tax impacts of approximately $0.09. Reported earnings per share are expected to be in the range of $0.22 - $0.26, including a benefit of approximately $0.03 from discontinued operations. This compares to third quarter of fiscal 2014 adjusted earnings per share of $0.16 and reported earnings per share of $0.12, both of which included discrete tax benefits of $0.08 per share.

*** The Street sees Q4 EPS of $0.20.

The Company also expects to report strong operating cash flow which is expected to reduce total debt to capital to approximately 29% as of August 31, 2014 compared to 33% as of May 31, 2014.

In the fourth quarter, all three of the Company’s businesses delivered higher volumes sequentially and our Metals Recycling and Steel Manufacturing Businesses are expected to generate substantially higher profitability. Due to the successful execution of our productivity and cost reduction initiatives, combined with higher sales volumes sequentially and less market price volatility, our Metals Recycling Business is expected to generate operating income in the range of $13 to $14 per ton, the highest quarterly performance since fiscal 2012. Accelerating demand from West Coast construction markets and the benefits of productivity initiatives are expected to drive significant operating leverage in our Steel Manufacturing Business, resulting in operating income in the range of $8 to $9 million, SMB's highest quarterly operating income since fiscal 2008. In the Auto Parts Business, higher car purchase volumes in the fourth quarter were largely offset by seasonally lower retail sales, leading to operating income in the range of $4 to $5 million. Significant productivity initiatives currently in process within APB are expected to drive favorable impacts beginning in the second half of fiscal 2015.

The preliminary, unaudited information provided above is based on the Company’s current estimate of its financial results for the fourth quarter ended August 31, 2014 and remains subject to change based on management’s ongoing review of the Company’s fourth quarter financial results and the completion of the Company’s annual audit.

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