There's one S&P/ASX 200 Index (Index:^AXJO) stock that's likely to beat consensus forecast when it hands in its profit report card in August.
I am not talking about Qantas Airways Limited (ASX: QAN) or Corporate Travel Management Ltd (ASX: CTD) – although they could surprise as COVID-19 travel restrictions ease.
The one that could pull an earnings rabbit out of its hat is BlueScope Steel Limited (ASX: BSL), at least that's according to Credit Suisse.
Too much bad news in the share price
The broker reviewed its forecasts across the steel products manufacturer's business segments and accounted for steel spreads and the coronavirus impact.
This led to Credit Suisse lowering its second half FY20 earnings before interest and tax (EBIT) estimates to $506 million, but that's still 22% higher than the average broker forecast for the same period.
Volumes at BlueScope's Australian Steel Products division isn't expected to be too badly hit by the COVID-19 fallout in the current half.
This is because of the long lead times for construction projects where work scheduled for this period would have continued.
Impact from COVID-19
"We do, however, see risk to 1H21 volumes, factoring in the time lag from COVID-19 on future activity decisions, particularly around the Alterations & Additions market which accounts for ~20% domestic volumes," said Credit Suisse.
On the other hand, I believe the government's $688 million HomeBuilders stimulus could provide some support for volumes in the new financial year.
Meanwhile, Credit Suisse is forecasting a utilisation rate of 85% for BlueScope's US business, North Star, as it believes the March quarter should be "solid" as the COVID-19 shutdown had yet to come into effect.
April and May would be quite a different story although the US is restarting its industries since.
Why BlueScope could beat consensus
"At current levels, the market appears to be pricing in depressed FY20/21 earnings in perpetuity, an unrealistic future outcome, in our view," said the broker.
"While the current trading climate is challenged with uncertainty around COVID-19's impact and duration, we see a clear value opportunity on even partial restoration towards what could be considered reasonable mid-cycle trading conditions and earnings."
The broker rates the stock as "outperform" (meaning a "buy") with a price target of $12.80 a share.
Buying opportunity for patient investors
But if the business returns to its post-coronavirus glory, the stock could be worth as much as $15 a share, based on Credit Suisse's estimates.
While no one knows when that might happen, it goes to show that BlueScope is a value buy for patient investors as the full recovery is a question of "when" and not "if".
