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Tickers in this Article: VMI, SHLO, KBSTY, NSSMY
On Jul 11, we upgraded steel pipe and tube company Valmont Industries, Inc. (VMI) to Outperform. Our view reflects strong demand environment across utility and irrigation markets.

Why the Upgrade?

Valmont had a strong first-quarter 2013 (reported on Apr 18) with both revenues and earnings topping Zacks Consensus Estimates. Revenues rose by double digits, buoyed by healthy gains across the company’s Utility Support Structures and Irrigation segments and contributions of acquisitions.

Following the release of the first quarter results, the Zacks Consensus Estimate for 2013 for Valmont went up 3.55% to $10.80 per share. The Zacks Consensus Estimate for 2014 has also moved up 1.43% to $11.35. With Zacks Consensus Estimates for both 2013 and 2014 moving up, the company now has a Zacks Rank #1 (Strong Buy).

Valmont’s strong presence in emerging markets should enable it to deliver incremental earnings in 2013. Its Irrigation and Coatings segments are witnessing strong momentum.

In the Irrigation segment, improving North American equipment demand amid the ongoing drought conditions and higher farm income is boosting sales and profitability.

Valmont is also poised to savor incremental opportunity in the utility market. The global transmission and distribution markets are seen as major long-term growth opportunities. Moreover, its Coatings segment is benefiting from moderating zinc prices and declining energy costs.

Valmont is actively pursuing capacity expansion through new constructions and extension of existing facilities to meet the increasing demand from utility customers in North America. We are also encouraged by its commitment to boost shareholder returns through higher dividend payouts.

Other Stocks to Consider

Other companies in the steel industry with favorable Zacks Rank are Kobe Steel Ltd. (KBSTY), Shiloh Industries Inc. (SHLO) and Nippon Steel & Sumitomo Metal Corporation (NSSMY). All of them hold a Zacks Rank #1 (Strong Buy).

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