Worthington Industries (WOR), which I first wrote about on June 10, 2009 at a price of $15.05, has completed the toughest part of its journey back to profitability.

Moving forward, Worthington's earnings increases will be dependent on the rebound in the processed steel and metal framing industries. As such, expected, substantial increases in durable goods orders in the second half of 2010 should provide a modest tailwind for WOR in 2010; the U.S. auto sector's doldrums represent the company's largest headwind.

The First Call FY2010/FY2011 EPS estimates for WOR are 79 cents to $1.22. Each EPS estimate looks about 10% low, according to my analysis.

I've upgraded steel processor Worthington Industries (WOR) to buy from the hold rating issued on October 9, 2009, at a price of $13.65. Here's why:

Worthington's stock has broken the uptrend line at about $12, and eliminated the bear hug concern from about three months ago. WOR was first recommended with a buy rating on June 10, 2009, at a price of $15.05.

For now, I'm placing a Hold on Worthington Industries' (NYSE: WOR) shares, first recommended with a Buy rating on June 10, 2009 at a price of $15.05.

The steel processing sector was one of those fields that was rudely treated by Wall Street as the U.S. and global recessions took hold, and niche player Worthington did not escape the aforementioned.

The steel processing sector was one of those fields that was rudely treated by Wall Street as the U.S. and global recessions took hold.

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.

"The steel stocks tend to go through boom and bust cycles depending on global economic activity; they have been pummeled over the last year, as the global economy slowed," notes turnaround expert George Putnam.

In his The Turnaround Letter, he explains, "But the news about steel is not all bad." Indeed, he believes some steel companies are poised for a turnaround. Here's his review of 6 leading steel production companies.

"Weakness in two big steel consuming industries, autos and construction, has been particularly troublesome for the steelmakers.

"However, there is evidence that steel inventories are gradually being worked off to low levels. There are also signs that economic activity in China, which is a huge consumer of steel, will not fall off as far as some economists initially feared.

With the surge in M&A activity, Wall Street analysts have been running screens on prospective targets. The latest report: A Prudential analyst thinks that Worthington Industries, Inc (NYSE:WOR) is in play.

Actually, this is a bit of a no-brainer. In fact, on the news, the company's stock price has surged 11% (there is also heavy option buying).

Founded in 1955, Worthington Industries processes steel for a variety of industries, such as construction, aerospace and automotive (the company's tagline is "stability in motion"). Sales are about $3 billion – and growing.

As for the Prudential analyst, he thinks that Worthington is the target for the world's biggest steel company, Mittal Steel Company N.V (AMS:IST).

Basically, this would be a way for Mittal to get better distribution in the US. Over the years, Worthington has built a comprehensive information technology (IT) system. To replicate this would be expensive and time-consuming.

But, keep in mind, this analysis is really based on computer models – and some old-fashioned human analysis. In other words, it is still speculation.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates DealProfiles.com.