Lower Steel Prices Hurt Steel Dynamics (STLD) Earnings in Q3
Steel Dynamics, Inc. STLD logged earnings of $3.47 per share in third-quarter 2023, down from $5.03 per share in the year-ago quarter. It lagged the Zacks Consensus Estimate of $3.49.
Net sales in the third quarter were down around 19% year over year to $4,587.1 million. It, however, surpassed the Zacks Consensus Estimate of $4,553.8 million.
The company’s results were hurt by lower realized flat rolled steel and steel fabrication prices in the reported quarter. It, however, witnessed steady steel demand and customer order activities during the quarter.
Steel Dynamics, Inc. Price, Consensus and EPS Surprise
Steel Dynamics, Inc. price-consensus-eps-surprise-chart | Steel Dynamics, Inc. Quote
Segment Highlights
Net sales for steel operations were $3,136.4 million in the reported quarter, down around 16% year over year. STLD registered steel shipments of 3.1 million tons in the quarter, modestly down from 3.15 million tons a year ago. This compares to our estimate of 3.26 million tons.
STLD's steel operations reported an average external product selling price of $1,191 per ton, down from $1,381 per ton in the year-ago quarter. It surpassed our estimate of $1,134 per ton.
Net sales of Metal’s recycling operations were $520.7 million in the quarter under review, reflecting an increase of around 10% from the year-ago quarter. STLD registered ferrous shipments of around 1.44 million gross tons in the quarter, up from 1.32 million gross tons a year ago. The figure was ahead of our estimate of 1.39 million gross tons.
The company's steel fabrication operations raked in sales of around $630.2 million, down around 45% year over year. Steel Dynamics registered steel fabrication shipments of 161,697 tons in the quarter, down from 218,441 tons. The figure fell short of our estimate of 178,451 tons.
Financial Position
Steel Dynamics ended the quarter with cash and cash equivalents of $1,765.5 million, up around 24% year over year. Long-term debt was $3,009 million, essentially flat year over year.
The company generated $1.1 billion of cash flow from operations in the quarter. It also repurchased $331 million of its common stock during the quarter, representing 1.8% of its outstanding shares.
Outlook
Steel Dynamics stated that it is seeing solid order entry activities across its steel operations as demand remains steady. STLD anticipates North American steel consumption to rise in the coming years, with increased demand for lower-carbon emission, U.S.-made steel products and a decline in import levels supporting steel prices.
Continued onshoring of manufacturing businesses along with expectations of significant fixed asset investment from public funding related to the U.S. Infrastructure, Inflation Reduction Act, and Department of Energy programs, are expected to position the domestic steel industry competitively. The company believes this will help all of its operational platforms, particularly the steel and steel fabrication business.
Price Performance
Shares of Steel Dynamics have gained 20.7% over the past year compared with 32% rise of its industry.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
Steel Dynamics currently has a Zacks Rank #3 (Hold).
Better-ranked stocks worth a look in the basic materials space include Koppers Holdings Inc. KOP, Carpenter Technology Corporation CRS and The Andersons Inc. ANDE.
Koppers has a projected earnings growth rate of 7.5% for the current year. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Koppers has a trailing four-quarter earnings surprise of roughly 21.7%, on average. KOP shares have surged around 65% in a year.
The Zacks Consensus Estimate for current fiscal-year earnings for CRS is currently pegged at $3.48, implying year-over-year growth of 205.3%. Carpenter Technology currently carries a Zacks Rank #1.
Carpenter Technology has a trailing four-quarter earnings surprise of roughly 10%, on average. The stock has rallied around 82% over the past year.
Andersons currently carries a Zacks Rank #2. The Zacks Consensus Estimate for ANDE's current-year earnings has been revised 3.3% upward over the past 60 days.
Andersons beat the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 64.4%, on average. ANDE shares have rallied around 53% in a year.
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