Why Schnitzer Steel Industries' Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Schnitzer Steel Industries (NAS: SCHN) are down 20% today as the company gave a disappointing market outlook after the market closed yesterday.

So what: Management said it saw volumes falling in its steel manufacturing business and ferrous volumes unchanged from the second quarter. Higher costs for raw materials and freight will compress margins and put pressure on earnings as the economy struggles to recover.

Now what: Shares have been crushed over the past year, and today they crashed through the previous 52-week low. But the stock now has a 2.3% dividend yield and trades at 8.4 time trailing earnings. Estimates have fallen hard, but the company is still expected to be highly profitable this year, and it has beaten earnings estimates the past three quarters. I'd like to see the stock settle down from its current tanking before buying, but it's beginning to look like a decent value, even in a weak market.

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At the time thisarticle was published Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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