UPDATE: D.A. Davidson Downgrades Sims Metal Management Ltd. to Neutral Ahead of 2H'13 Earnings Report

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In a report published Tuesday, D.A. Davidson analyst Brent Thielman downgraded the rating on
Sims Metal Management Ltd.SMS
from Buy to Neutral. In the report, D.A. Davidson noted, “We are lowering our 2H forecast to A$0.02 per share from A$0.33 previously. Ferrous scrap markets remained challenging during the period, with weaker U.S. export volumes, declining prices and continued tight supply conditions. We are now forecasting more significant margin compression for Sims reflecting these conditions. We are also lowering our fiscal 2014 forecasts as detailed below and in the attached model. In addition to market pressures, Sims previously announced a series of additional charges amounting to ~A$115 million or an estimated ~$0.35 per share) which will impact results. These charges include inventory write-downs, impairment charges and other costs associated with restructuring of its U.K. operations. We have not accounted for these items in our model, which are likely to be recorded separate of underlying earnings. The magnitude of these charges, which are in addition to previously recorded charges associated with its U.K. operations, are disappointing; ongoing market weakness is not expected to provide an offset.” Sims Metal Management Ltd. closed on Monday at $8.31.
Posted In: Analyst ColorDowngradesAnalyst RatingsBrent ThielmanD.A. Davidson
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