Mechel Smashes Forecasts

Dec.15.10 | About: Mechel OAO (MTL)

Even though vertically integrated Russian steel maker Mechel (NYSE:MTL) beat its peers and Wall Street expectations with yesterday's earnings, the stock is giving back a bit of ground today.

MTL booked sales of $2.6 billion in the third quarter and posted a net profit of $342 million, trouncing consensus forecasts on the bottom line.

All in all, analysts only expected the company to earn a net profit of $244 million in the quarter. Revenue and EBITDA came in roughly on track with consensus.

So far this year, MTL's revenue has soared 73% and its operating profits are up 800 percent. It is not only selling a lot more coal to outside customers, but even its core steel business is generating 80% more revenue and 300% as much profit over last year.

These numbers are fantastic and well above what most of the big Wall Street houses were looking for. However, the stock has had a huge run and many are using this as a cover to take some profits off the table.

In fact, technicians say MTL is at a level that merits some selling. And so, while management sees demand for its underlying product growing in its home market -- and input costs are under the tightest control in the industry -- the stock is still down a bit today.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.