Here's Goldie's report on LSS:
Lone Star (IL/A): Lowering estimates on 3Q04 prennouncement
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* LSS preannounced disappointing 3Q04 EPS of $0.85-$0.95, below our estimate *
* of $1.32 and consensus of $1.23 due to (1) higher steel costs, (2) higher *
* labor costs associated with transition from 2 shifts to 3 shifts at a major *
* plant, and (3) lower pricing for specialty tubing. We are lowering our *
* 2004/ 2005 EPS estimates to $3.09/ $4.25 from $4.15/ $5.65, and our fair *
* value estimate from $39 to $35. Our 3Q and 4Q estimates are now both $0.85, *
* revised from $1.32 and $1.43, respectively. Higher steel costs are likely *
* to continue, and although OCTG prices are no longer rising faster than *
* steel prices, OCTG supply-demand remains tight, inventories low, and *
* potential for price reacceleration in 2005 is high. Despite 20% correction *
* in LSS, we believe our IL/A rating remains appropriate, pending improved *
* visibility on a reacceleration in pricing. *
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