UBS Financial Raises Texas Industries to Buy

Analyst Trip Rodgers says he expects the company's steel segment to post profits after losing money only two quarters ago

UBS Financial upgraded Texas Industries (TXI ) to buy from neutral.

Analyst Trip Rodgers says he now expects the company's steel segment to earn $87 million in fiscal year 2005 (May), vs. its $40 million loss runrate only two quarters ago. He ties the dramatic turnaround in steel to: 1) recovery in soaring scrap costs via price surcharge and higher base rates; 2) elimination of imports by a weak dollar and lofty freight rates; 3) improvement in demand; 4) increased utilization at the company's Virginia plant.

Citing the company's large operating leverage, Rodgers narrows his 72 cents fiscal year 2004 loss estimate to 7 cents per share. He ups $1.32 fiscal year 2005 EPS forecast to $2.90 EPS and $2.50 fiscal 2006 EPS estimate to $3.70 EPS. He also raises his $38 stock price target to $43.

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