$IIIN is expected to report earnings Friday, and they’re going to miss.
I am at work so didn’t write out a fancy DD but here’s the gist.
They had declining revenue from 2022 until last quarter. They primarily provide steel wire mesh for concrete construction (think roads, bridges, dams, concrete buildings) and trump froze the funds from the inflation reduction act that were bolstering those jobs. Now they have to jump through the filing hoop to get projects approved which adds red tape and slows new projects. I work in steel and while long term projects haven’t changed, short term projects are slower and there are less big new projects happening.
They are trading at historically high multiples in terms of price to free cash flow, earnings, and EV to EBIT. The stock has been climbing since touching $22.50 a week ago. They simultaneously have historically low ROA, ROE, ROIC with all three being in the bottom 10% for the industry.
They are already the biggest producer in the nation for what they do and growth is dependent on market growth. It is essentially priced 1 to 1 with revenue, a miss would mean another drop.
The only insider action over the last four years has been selling of the stock aside from one small purchase.
The counter argument is that 83% of the company is owned by institutional investors. They also said that cheap imports were a primary threat to their business so the tariffs on steel could be a bolster, but we haven’t had time to see any positive impacts. It also means if trump backs off the steel tariffs that’s a net negative for them.
My PT range is 19-22. Even if earnings stay flat they should be roughly 21.80-22.20. Another big issue is lack of option liquidity so makes put purchasing difficult. I think 2-4 years from now this is a long but next 3-6 months is a short
There is a high (relative) amount of option interest for the end of the week
Also, if you believe in magic crayons, the 1-year chart is making consistently lower highs and lower lows. Should be set up for a break down below $22.50 on a bad report.
Positions: May $25 and $22.5 PUTS