Further, niche player Worthington Industries (NYSE: WOR) did not escape the above, but Wall Street's mistake has created an opportunity for investors who can tolerate moderate risk.
In general, analysts see a 5-6% revenue decline in F2009 for WOR, shrinking to a 0-2% revenue dip in F2010. The revenue trend is in-line with other U.S. economic fundamental data that suggests increasing durable goods demand and a less-steep decline in non-residential construction. To be sure, the aforementioned economic fundamentals are not the stuff of the "Roaring 20s," but they're enough to point to better days ahead for processed steeled and a Buy rating for WOR.
Analysts are also impressed by Worthington's cost cutting program, which has lowered the company's break-even point. A strong balance sheet adds to the favorable story. The First Call FY2009/FY2010 EPS estimates for WOR are a loss of -$1.12 and a profit of 55 cents.
The risks include a failure of the U.S. economy to start to recover in Q3/Q4, which would weigh on steel processing prices.
Stock Analysis: Worthington Industries is a moderate-risk stock. Consider buying a 25% position in WOR now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your WOR position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $5.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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