Will Strong Demand Drive Steel Dynamics' (STLD) Q2 Earnings?

Steel Dynamics, Inc. STLD is set to release second-quarter 2022 results after the closing bell on Jul 20.
Steel Dynamics' earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 2.5%, on average. The company posted an earnings surprise of 7.9% in the last reported quarter. Its second-quarter results will likely reflect the benefits of strong end-market demand.
Shares of the company have gained 7% in the past year compared with 23.9% decline of the industry.

Let's see how things are shaping up for this announcement.

Zacks Model

Our proven model predicts an earnings beat for Steel Dynamics this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earning beat.

Earnings ESP: Earnings ESP for Steel Dynamics is +8.23%. The Zacks Consensus Estimate for the second quarter is currently pegged at $5.68. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: Steel Dynamics currently carries a Zacks Rank #3.

What do the Estimates Say?

Steel Dynamics envisions second-quarter earnings in the range of $6.33-$6.37 per share, which suggests a record quarterly performance. Adjusted earnings have been forecast in the band of $6.61-$6.65 per share.

The Zacks Consensus Estimate for revenues for Steel Dynamics for the to-be-reported quarter is at $6,066 million, suggesting a year-over-year rise of 35.9%.

The consensus estimate for average external product selling price for the company's steel operations is pegged at $1,471 per ton, indicating a year-over-year increase of 13.9%. The same for total external steel shipments stands at around 3.2 million tons, up around 9.7% year over year.

A Few Factors to Watch

The company's second-quarter results are likely to have benefited from demand strength across key markets. Strong demand across automotive, construction and industrial markets is expected to have aided its performance. Strength in the non-residential construction sector continues as reflected by strong order activities. Strong demand is expected to have driven its shipments in the to-be-reported quarter.

Steel Dynamics, last month, said that it sees second-quarter profitability from steel operations to be historically strong but lower than first-quarter 2022 levels. The downside reflects lower earnings from the company's flat roll steel operations, as average flat roll pricing more than offset projected higher shipments. Strong demand for long product steel products supported higher average realized pricing in the quarter. The company witnessed solid overall steel demand during the second quarter, notwithstanding softening hot roll coil steel pricing.

U.S. steel prices witnessed a significant downward correction during the second quarter. After surging to nearly $1,500 per short ton in April 2022 due to supply concerns stemming from the Russia-Ukraine war, the benchmark hot-rolled coil ("HRC") prices are on a downward trend and have retreated to levels before the conflict. HRC prices have fallen below the $1,000 per short ton level. The downward drift partly reflects shorter lead times. Mills are also negotiating lower prices for new orders. Fears of a recession have also impacted prices.

Nevertheless, Steel Dynamics is expected to have benefited from higher year over year average selling prices in the June quarter. The impacts of higher selling prices are likely to reflect on its revenues and margins in the quarter.

Steel Dynamics, Inc. Price and Consensus

 

Steel Dynamics, Inc. price-consensus-chart | Steel Dynamics, Inc. Quote

Stocks That Warrant a Look

Here are some companies in the basic materials space you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Celanese Corporation CE, scheduled to release earnings on Jul 28, has an Earnings ESP of +1.03% and carries a Zacks Rank #3.

The Zacks Consensus Estimate for Celanese's second-quarter earnings has been revised 3.9% upward over the past 60 days. The consensus estimate for CE's earnings for the quarter is currently pegged at $4.58.

FMC Corporation FMC, slated to release earnings on Aug 2, has an Earnings ESP of +1.58% and carries a Zacks Rank #3.

The Zacks Consensus Estimate for FMC's second-quarter earnings has been stable over the past 60 days. The consensus estimate for FMC's earnings for the quarter stands at $1.90.

Huntsman Corporation HUN, scheduled to release earnings on Aug 2, has an Earnings ESP of +0.93% and carries a Zacks Rank #3.

The Zacks Consensus Estimate for Huntsman's second-quarter earnings has been revised 1.8% upward over the past 60 days. The consensus estimate for HUN's earnings for the quarter is currently pegged at $1.13.
 
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