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Steel Dynamics Analyst Projects Q3 Performance Decline

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Steel Dynamics Analyst Projects Q3 Performance Decline

Steel Dynamics, Inc. (NASDAQ: STLD) reported second-quarter results after the close Monday and announced a new mill site.

The earnings call scheduled for Wednesday is likely to focus on recent steel order trends and the company’s capital allocation, including the planned mill investment in Texas, according to KeyBanc Capital Markets.

The Analyst

Philip Gibbs commented on Steel Dynamics’ second-quarter print and third-quarter prospects.

The Thesis

Steel Dynamics reported second-quarter FIFO adjusted EPS at 87 cents, missing KeyBanc’s estimate of 90 cents and the Street's expectation of 89 cents, Gibbs said in a Monday note. (See his track record here.) 

The company recorded adjusted EBITDA of $366 million, beating KeyBanc’s estimate of $360 million, while FCFE of $276 million fell short of the estimate of $333 million due to changes in net working capital, the analyst said. 

The results were driven by the steel segment, which delivered higher-than-expected shipments and ASPs, he said.

The performance of fabrication, metals recycling and other segments was disappointing, Gibbs said. 

Steel Dynamics continues to expect strong underlying demand in the U.S. and an easing of customer de-stocking pressures, the analyst said. 

KeyBanc expects a strong sequential decline in third-quarter results due to lag pricing effects in sheet and lower spreads in SBQ products, although this could be partially offset by an expansion in spreads at raw materials and fabrication, he said. 

Steel Dynamics’ new greenfield mill site at Sinton, Texas is expected to cost $1.9 billion and begin construction in early 2020, according to KeyBanc; construction should ramp up in mid-2021.

Price Action

Steel Dynamics shares were trading up 1.05% at $31.87 at the time of publication Tuesday. 

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Steel Dynamics Q2 Earnings Preview

Latest Ratings for STLD

DateFirmActionFromTo
Dec 2020Morgan StanleyInitiates Coverage OnOverweight
Oct 2020Credit SuisseMaintainsNeutral
Jul 2020Credit SuisseMaintainsNeutral

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