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October 31, 2010 Dear Friend,
We will NOT have a morning call on
November 1st as I will be en route to Toronto to visit New Gold, Barrick
Gold, Quadra FNX Mining, HudBay Minerals and attend the November 2nd Teck
investor day.
We raised our earnings estimates for
MeadWestvaco and price target to $37 from $36, and it appears to be a fine
way to "hold cash" with a 3.6% common dividend yield with capital
appreciation potential. We model a five year cap ex level of $1.25 billion,
debt paydown of $1.65 billion and year-end 2015 cash balances of $1.6
billion with no land sales and no acquisitions. The company has good
flexibility to buy in shares or spend to grow the business.
We cut our 2011 earnings estimate for
Neutral-rated U.S.Steel to a $1.72 per share loss and our 2012 estimate to
$2.71 from $4.70 due to overcapacity. We stayed at a $48 price target as we
estimate post-2013 earnings at over $4.00 per share, but it appears too
early for the market to pay any premium for a post-2013 turnaround in the
presence of 2011 as a third straight loss year.
Separately, we reviewed the physical
holdings of ETFs in the context of various other physical flows in the gold
market.
Faithfully,
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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