RPT-UPDATE 2-Olympic Steel posts Q3 profit, shares up

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* Q3 EPS $0.06 vs est $0.24

* Q3 revenue falls 64 pct to $121.6 mln, trails estimates

* Tons sold in Q3 drop 32 pct

* Shares up 5 pct (Recasts; adds details, analyst's comments, updates stock activity)

By Antonita Madonna Devotta

BANGALORE, Oct 29 (Reuters) - Olympic Steel Inc (ZEUS.O) posted its first quarterly profit this year helped by cost cuts, but its earnings trailed Wall Street estimates on lower shipments.

The distributor of steel products, like most of its peers, has resorted to workforce reductions, salary cuts and measures to exhaust its higher-cost inventories, due to the weakness in the economy.

For the third quarter, the company's net income dropped 97 percent to $671,000, or 6 cents a share, from $24.2 million, or $2.21 cents a share, a year ago.

Revenue for the company fell 64 percent to $121.6 million, as shipments in the period decreased 32 percent to 181,000 tons.

Analysts on average were looking for earnings of 24 cents a share, before items, on revenue of $138.8 million, according to Thomson Reuters I/B/E/S.

"There were a few competitors who were not able to reach profitability in the third quarter," analyst Nat Kellogg of Next Generation Equity Research said.

Volumes have risen sequentially and costs continue to fall, the analyst said.

The company operates as a distributor, an intermediary between steel producers and manufacturers who require processed steel for their operations.

The third-quarter has seen steel mills bring back some of the idled capacity, with traders and stockists returning to the market to restock, as macroeconomic data improves and inventory stockpiles are depleted.

"They are in the middle of the supply chain and part of the reason the mills are getting back on track is because service centres like Olympic are buying products because their inventories were so low," Kellogg said. "However, end demand remains relatively low."

Demand is expected to show sequential improvement in October and November, while December could again be weak as a result of shutdowns during the holiday season, said Kellogg, who has a neutral rating on the stock.

"The one thing that I think investors will look favorably upon is that the balance sheet is in good shape," he said. "They ended the quarter with almost no debt."

Shares of the Cleveland, Ohio-based company rose 5 percent to $27.80 Thursday morning on Nasdaq. (Reporting by Antonita Madonna Devotta in Bangalore; Editing by Ratul Ray Chaudhuri)