Worthington Steel (NYSE: WS) has not been a stand-alone public company for long, but its quarterly results appear to be getting it on a lot of investors' radar screens. Shares of Worthington were up 21% as of 1 p.m. ET.
Starting out strong
Worthington Steel is a steel processing business that was formerly part of Worthington Industries. The steel operation, which specializes in steel laminations and automotive lightweight metals, made its market debut in December.
The steel company earned $0.99 per share on revenue of $805.8 million in its fiscal third quarter ending Feb. 29, an improvement from the $0.17 per share on sales of $780.7 million the business did as part of Worthington Industries a year ago. The sole Wall Street analyst who issued an estimate had forecast $0.80 per share in earnings.
The company said that profitability was helped by a $45.9 million favorable change from an estimated inventory holding loss. Revenue was up on stronger pricing.
"The Worthington Steel team delivered a strong third quarter and I want to thank and congratulate our employees on their great performance in our first quarter as a stand-alone company," CEO Geoff Gilmore said in a statement "We saw improvements in sales, operating income and net income over the same quarter in 2023, and our teams are laser-focused on finishing the fiscal year strong."
Is Worthington Steel a buy after its strong quarterly results?
With Friday's jump, shares of Worthington Steel are now up 54% since its December separation. The market is still trying to figure out how to value this business as an independent one, and the stock's pop is an indication that investors' initial assessment was off.
Following the move, Worthington now trades at about 13.7 times projected earnings. That's within range of the multiples assigned to market giant U.S. Steel (11.7 times) and disruptor Nucor (14.4 times).
It is hard to imagine Worthington Steel has many 21% share-price jumps in its future, but the company is well on its way to establishing itself as a solid operator. With a dividend yield of 1.6% and the prospect of stock buybacks in the future, it could be a decent choice for income-focused investors.
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Lou Whiteman has positions in Nucor. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
