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OLYMPIC STEEL INC (ZEUS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered sequential profitability improvement: Adjusted EBITDA rose to $14.5M from $13.0M in Q3, with all three segments EBITDA-positive despite soft pricing and demand .
  • Revenue declined to $418.8M (vs $470.0M in Q3 and $489.4M in Q4’23), while GAAP diluted EPS increased to $0.33 (vs $0.23 in Q3; $0.64 in Q4’23); Adjusted EPS was $0.13 reflecting LIFO and acquisition-related items .
  • Strategic execution advanced via the immediately accretive Metal Works acquisition (Nov 2024) and continued automation investments; 2025 capex guided to ~$35M, focused on throughput, safety, and fabrication growth .
  • Capital returns strengthened with a 7% dividend increase to $0.16 per share; effective tax rate guided to ~27–28% for 2025, supporting cash planning .
  • Consensus estimates from S&P Global were unavailable for Q4 2024; key stock reaction catalysts include dividend hike, sequential EBITDA improvement, and end-products/fabrication mix resilience . S&P Global consensus unavailable due to data access limitations.

What Went Well and What Went Wrong

What Went Well

  • Sequential profitability improvement: “sequential improvement in fourth quarter 2024 earnings versus third quarter” with adjusted EBITDA up Q/Q .
  • Mix and diversification: Growth in galvanized participation (+17% in 2024; +24% in 2023) and expanded fabrication supported margins in Carbon; all segments posted positive EBITDA every quarter of 2024 .
  • Strategic M&A: Metal Works acquisition was “immediately accretive,” strategically aligned to higher-value end products and supply-chain synergies via sourcing/first-stage processing .

What Went Wrong

  • Top-line pressure: Net sales fell to $418.8M vs $470.0M in Q3 and $489.4M in Q4’23 on weaker OEM demand and lower metals pricing; EPS down YoY to $0.33 from $0.64 .
  • Macro headwinds: Hot-rolled carbon pricing fell >40% across 2024’s first seven months; nickel at 4-year lows pressured stainless surcharges; PMI <50 for 11 of 12 months .
  • Leverage higher post-deal: Revolver rose to $272.5M at year-end; debt-to-equity increased to 0.47 from 0.34; debt subsequently at ~$250M per call update .

Financial Results

Consolidated Performance (Q2 2024 → Q3 2024 → Q4 2024)

MetricQ2 2024Q3 2024Q4 2024
Net Sales ($USD Thousands)$526,250 $469,996 $418,784
Operating Income ($USD Thousands)$15,110 $7,809 $9,002
Net Income ($USD Thousands)$7,660 $2,734 $3,889
Diluted EPS ($USD)$0.66 $0.23 $0.33
Adjusted EPS ($USD)$0.60 $0.11 $0.13
Adjusted EBITDA ($USD Thousands)$21,337 $13,043 $14,453

Year-over-Year Comparison (Q4 2023 → Q4 2024)

MetricQ4 2023Q4 2024
Net Sales ($USD Thousands)$489,408 $418,784
Net Income ($USD Thousands)$7,408 $3,889
Diluted EPS ($USD)$0.64 $0.33
Adjusted EPS ($USD)$0.36 $0.13
Adjusted EBITDA ($USD Thousands)$16,698 $14,453

Segment Breakdown (Q4 2023 → Q4 2024)

Segment MetricQ4 2023Q4 2024
Carbon Flat Products – Net Sales ($USD Thousands)$280,169 $235,521
Carbon Flat Products – Tons Sold202,434 186,723
Carbon Flat Products – Avg Selling Price ($/ton)$1,384 $1,261
Carbon Flat Products – Operating Income ($USD Thousands)$3,993 $1,963
Specialty Metals – Net Sales ($USD Thousands)$121,400 $110,754
Specialty Metals – Tons Sold26,424 26,172
Specialty Metals – Avg Selling Price ($/ton)$4,594 $4,232
Specialty Metals – Operating Income ($USD Thousands)$2,277 $3,012
Tubular & Pipe – Net Sales ($USD Thousands)$87,839 $72,509
Tubular & Pipe – Operating Income ($USD Thousands)$11,547 $8,209

KPIs and Balance Sheet Highlights

KPIQ4 2023Q4 2024
Dividend per Share ($USD)$0.15/quarter $0.16/quarter (payable Mar 17, 2025)
Debt-to-Equity (x)0.34 0.47
Credit Facility Revolver ($USD Thousands)$190,198 $272,456
Cash & Equivalents ($USD Thousands)$13,224 $11,912
Total Shareholders’ Equity ($USD Thousands)$555,478 $573,924
Net Cash from Operating Activities – FY ($USD Thousands)$175,159 $33,679
Operating Expenses – Q4 ($USD Thousands)$100,400 $96,500
Effective Tax Rate – Q4 (%)23.3% 18.9%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Regular Quarterly DividendQ1 2025$0.15/share $0.16/share; payable Mar 17, 2025; record Mar 3, 2025 Raised
CapExFY 2025N/A~$35M expected New/Initiated
Effective Tax RateFY 2025N/A~27%–28% New/Initiated
Strategic FocusFY 2025N/AContinued investment in automation, fabrication, and acquisitions; remain nimble re tariffs/capacity Maintained strategy

Earnings Call Themes & Trends

TopicQ2 2024 (Previous Mentions)Q3 2024 (Previous Mentions)Q4 2024 (Current Period)Trend
Automation/TechnologyOrdered two cut-to-length lines and one high-speed slitter to expand coated/specialty capacity Investing in equipment automation and processing; drive efficiency/productivity CapEx ~$35M in 2025; multiple automation/throughput projects slated for late 2025/early 2026 Increasing investment cadence
Supply Chain/Lead TimesDiversification enables resilience against pricing volatility Managing operating expenses; credit availability supports growth Tariff-driven spot price increases; lead times extending (HR 6–8 wks, CR/coated 8–10 wks) Tightening supply chain; longer lead times
Tariffs/MacroPricing down 22% QoQ; 39% YTD; challenging near-term OEM demand lower; pricing pressure; remained profitable Tariffs on steel/aluminum impacting spot prices and timing (March 12 timeline); optimism long term Macro firming via tariffs; watch profitability timing
Product PerformanceEnd-products and coated mix drive profitability Galvanized participation rising; fabrication expansion Carbon EBITDA supported by end-products/fabrication; Specialty Metals stable despite nickel lows; pipe & tube EBITDA solid Mix shifting to higher-margin/fabrication
Regional Expansion47 facilities footprint 47 locations; credit availability Action Stainless Houston relocation to 70k sq ft building; scaling South/West presence Capacity expanding regionally
M&AActive posture; integrating CTB Strategic focus; flexibility to invest Metal Works acquired; immediately accretive; $80M price; ~6.15x TTM adj. EBITDA Ongoing M&A to reduce earnings volatility
Capital AllocationDividend maintained/increased over years Dividend $0.15; debt reduced Q3 Dividend raised to $0.16; debt at ~$250M post Q4 Balanced growth and returns

Management Commentary

  • CEO tone on resilience and strategy: “Sequential improvement in fourth quarter 2024 earnings versus third quarter… we executed on our strategy to be profitable in all market conditions” .
  • Mix shift benefits: “Concerted effort and success in growing our fabrication business… looks like an area of strength as we move into 2025” .
  • Segment performance: “All 3 segments achieving EBITDA positive results in the fourth quarter… segments collectively outperformed Q3, reporting a sequential $1.5M improvement in adjusted EBITDA” .
  • Investment pipeline: Projects include new cut-to-length and slitter capacity and automation to improve safety/efficiency and expand capacity by >30% at Chambersburg .
  • M&A rationale: “Real synergies… integration into the Olympic Steel supply chain… sourcing relationships and first-stage processing” .

Q&A Highlights

  • Carbon margins: Gross profit per ton strength driven by end-products and fabrication; galvanized growth supported margin mix .
  • Pipe & Tube outlook: Expect typical Q1 seasonal strength with recovery from low Q4 base; shifting toward 50/50 distribution vs fabrication, investing in tube lasers .
  • Specialty metals/aluminum: Midwest premium spike; most business contractual with locked ingot exposure; ongoing aluminum market share gains .
  • Tariffs timing and profitability: Profitability impacts seen late Q1/early Q2 tied to March 12 tariff implementation; spot pricing rising; lead times extending .
  • Capex and margins: 2025 capex items largely operational in late 2025/early 2026; expected positive margin impact in 2026 .
  • OpEx dynamics: Q4 OpEx $96.5M; down $1.8M YoY in incentives tied to profitability .

Estimates Context

  • Consensus estimates (S&P Global/Capital IQ) for Q4 2024 revenue, EPS, and EBITDA were unavailable due to data access limitations during retrieval. The company reiterates policy not to endorse analyst estimates .
  • Implication: Without consensus, formal beat/miss classification cannot be determined; however, sequential adj. EBITDA improvement and mix shift toward fabrication/end-products are positive directional markers .

Key Takeaways for Investors

  • Sequential profitability improvement with Q4 Adjusted EBITDA up to $14.5M and positive EBITDA across all segments; execution consistent with diversification strategy .
  • Mix shift toward fabricated and coated products is cushioning margins against pricing pressure; galvanized participation continues to rise .
  • Dividend increase to $0.16 signals confidence in cash generation; watch for 2025 effective tax rate ~27–28% and ~$35M capex cadence .
  • Tariff-driven price/lead-time changes could support near-term pricing but may shift transactional dynamics; profitability impact likely late Q1/early Q2 .
  • Balance sheet capacity remains ample with >$200M availability; post-Metal Works debt at ~$250M under the revolver provides flexibility for growth investments .
  • 2026 margin trajectory should benefit from automation and capacity projects entering service in late 2025/early 2026 .
  • Near-term trading: Dividend hike and sequential EBITDA improvement are constructive; monitoring tariff implementation and OEM demand recovery is key to revenue trajectory .