Steel Dynamics' (STLD) Q2 Earnings & Revs Jump, Shares Up

Zacks

Steel Dynamics, Inc. (STLD), one of the leading domestic steel producers in the U.S., reported earnings of 31 cents per share in the second quarter of 2014 compared with 13 cents per share registered in the year-ago quarter. The results beat the Zacks Consensus Estimate by a penny. Profit jumped around two-and-a-half-fold year over year to $72 million.

Operating income increased 90.6% year over year and 63% sequentially to $132 million in the quarter. The sequential increase was due to higher profitability across all its segments.

The company’s sales were $2,069.8 million in the quarter, up 14.9% year over year.

Steel Dynamics’ shares rose as much as 5.2% in the trading session following the announcement. The stock closed at $21.69 yesterday, gaining around 4.5%.

 

 

 

Segment Details

 

Steel Operations

The average external sales price was up 6.2% to $833 per ton from $781 per ton in the previous-year quarter. Average ferrous scrap cost increased 2.8% to $364 per ton from $354 per ton a year ago. Total sales in this segment also jumped 17.6% to $1,371 million from $1,166 million in the year-ago quarter. Operating income in this segment increased 80% year over year and 50% sequentially to $158 million. The sequential improvement was driven by record shipments and improved metal spreads. 

Metals Recycling and Ferrous Resources

Total sales in this segment increased 13.6% to $1,014 million from $893 million in the year-ago quarter. Operating income from the segment increased 17% sequentially due to increase in nonferrous metal spread.

Losses from the company’s Minnesota operations had a $9.1 million impact on the second quarter consolidated net income. During the reported quarter, the company stated that the remaining operating trials were completed and a four week outage was taken to upgrade the rotary hearth furnace, and as anticipated these trials and the outage resulted in second quarter losses. 

Steel Fabrications Operations

The segment performed better than the other segments as total sales increased 29.5% year over year to $135 million from $104 million a year ago. Shipments also improved 21.8% year over year to 105,188 tons in the quarter. Operating income from the company's fabrication operations more than doubled from the sequentially prior quarter. The segment benefited from modest growth in the nonresidential construction market.

Financial Position

Steel Dynamics’ cash and cash equivalents were $357.5 million as of Jun 30, 2014, up 47% from $243.7 million as of Jun 30, 2013. Long-term debt was $1,742.1 million as of Jun 30, 2014, roughly 2% lower than $1,774.2 million as of Jun 30, 2013.

Guidance

Steel Dynamics envisions increasing demand for its products. The recent growth projects will also contribute to the company’s earnings.  The automotive and manufacturing markets remain strong, and the company believes that increase in domestic energy investments will continue to strengthen. 

Steel Dynamics remains optimistic about the strength in the recovering broader U.S. economy, and it also conceives that the non-service sector portion of the domestic GDP is capable of growing at a faster rate than the overall GDP.  The company believes that its diversified products and team will enable it to achieve a competitive edge.

Steel Dynamics’ organic growth projects and latent steel capacity, along with its planned acquisition of the Severstal Columbus steel mill, and its belief that domestic steel consumption is on the upward trend, all bode well for the company’s growth.

Steel Dynamics currently carries a Zacks Rank #3 (Hold).

Some other stocks worth considering in the steel industry include Olympic Steel Inc. (ZEUS), ThyssenKrupp AG (TYEKF) and Universal Stainless and Alloy Products Inc. (USAP).  All of these stocks hold a Zacks Rank #2 (Buy).

Read the Full Research Report on STLD
Read the Full Research Report on USAP
Read the Full Research Report on ZEUS
Read the Full Research Report on TYEKF


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