Is Stelco a Buy Ahead of its Q4 Results?

Stelco Holdings Inc. (TSX:STLC) stock has plunged 33.2% over the past three months as of close on January 4. Shares are down 35% year over year. Stelco stock got off to a great start following its IPO in late 2017, but trade tensions and broader volatility dealt major damage to the stock price throughout 2018.

Stelco had a very strong showing in the third quarter of 2018. The company reported that revenue rose 84% year-over-year to $619 million. It achieved steel shipping volumes of 586,000 net tons, up 43% from the prior year. The average selling price per net ton also rose 24% year-over-year as prices increased on the back of pressure from tariffs.

The board of directors approved a quarterly dividend of $0.10 per share which represents a 2.7% yield. Stelco stock last boasted an RSI of 34, indicating that the stock is just out of oversold territory as we head into the second trading week of January.

Shares were flashing oversold signals in the final trading days of December. As it stands, even after a 2.6% uptick on January 4, Stelco stock is still hovering around 52-week lows.

U.S. Congress has yet to ratify the United States-Mexico-Canada Agreement, but President Trump is reportedly mulling scrapping NAFTA in order to push ratification forward. In any case, the U.S. side has failed to cancel the steel tariffs it put on back in the spring of 2018, despite firm protestations from the Canadian and Mexican delegations. If these tariffs are removed, the US side has also threatened that it will require quotas going forward.

Stelco is set to release its fourth-quarter results in February. Conservative investors looking to duck current volatility may want to wait out ratification before jumping in on Stelco, even at its current price.