Horsehead Holding Corporation - Value

Horsehead Holding Corporation (ZINC) is cashing in on the perfect storm of strong demand for zinc products and higher zinc and nickel prices. The company has surprised on estimates 3 out of the last 4 quarters by an average of 35.6%. Will it do it again in the fourth quarter?

Horsehead Holding is the parent company of Horsehead Corporation, which produces specialty zinc and zinc-based products. The company has 7 facilities throughout the U.S.

It is also a leading recycler of electric arc furnace dust and also is the parent of The International Metals Reclamation Company (INMETCO), which recycles metals-bearings wastes and is a leading processor of nickel-cadium (niCd) batteries in North America.

Horsehead Surprised By 67% in the Third Quarter

On Nov 4, Horsehead Holding reported its third quarter results and saw a net loss of 1 cent per share but this was better than the Zacks Consensus which called for a loss of 3 cents per share.

For the 9 months ended Sep 30, 2010, however, the company had consolidated net earnings of 23 cents per share versus a net loss of 78 cents in the first 9 months of 2009.

Sales rose 50.1% to $90.5 million compared to last year. Higher average price realization and higher shipment volume along with the INMETCO acquisition, which closed on Dec 31, 2009, boosted the quarter.

The third quarter was negatively affected by the tragic incident at the Monaca refinery on July 22, 2010 which killed 2 employees and shut down all of the columns used in the production of zinc oxide and refined zinc metal.

As a result, production of zinc products for the third quarter fell 25% compared to the year ago period. Full production was expected to be restored by the end of 2010.

Outlook for the Fourth Quarter

The company was bullish about the forward outlook in November. It expected to operate its recycling facilities near full capacity in the fourth quarter to reduce the backlog of dust that was there.

The 2010 Zacks Consensus Estimate has been holding at 30 cents per share over the last 60 days, down from 31 cents. But that is earnings growth of 162% compared to 2009 where the company lost 48 cents per share.

However, analysts are really optimistic about 2011.

Earnings are expected to grow another 200% as the Zacks Consensus Estimate has risen 3 cents to 90 cents per share over just the last week.

Horsehead Holding is scheduled to report fourth quarter results on Feb 25.

Horsehead Holding Has Attractive Valuations

Even though shares of Horsehead have rallied to near 2-year highs in recent months, there is still value there.

The company has a forward P/E of 14.6 which is within the value parameters I follow which is under 15x times.

It also has a price-to-book ratio of just 1.6 which is easily within the value parameter of under 3.0.

Horsehead Holding is a Zacks #1 Rank (strong buy) stock.

Check out the 2-year chart below.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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