Analyst: Steel Dynamics Inc. Q2 Inventory Outlook Is Key

Steel Dynamics Inc.

is likely to post a 65 percent sequential decline in first-quarter earnings after the bell Monday, but an analyst said investors will focus on prospects for an improved second quarter. The Fort Wayne, Indiana-based steel company said last month that pricing had declined to "globally competitive levels," and Deutsche Bank's Jorge Beristain said that might help remove surplus inventory that has held down profits. "The focus will be on color around recent market developments," according to Beristain, who will look for information on inventories, pricing, imports and order trends when the company confers with analysts onTuesday morning. Continued strength in demand from U.S. automakers, the the manufacturing and construction sectors "should lead to a stronger second quarter," Beristain said. Analysts expect the company will post first-quarter earnings of $0.15 cents a share, down from $0.40 cents for the December quarter. Separately, Clarkson analyst Lee McMillan last week launched coverage on Steel Dynamics with a Hold rating and $19 target last week, citing its 22 percent stock price run-up in the past three months. McMillan thinks the outlook for construction will help the company's fabrication unit while falling scrap prices bode well for its mill operations. But lower prices for raw materials will cause continued losses at Steel Dynamics' Minnesota operations, McMillan said. The company has slated a conference cal