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Steel Dynamics' (STLD) Q3 Earnings Top, Profit Shoots Up

Anindya Barman
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Steel Dynamics' (STLD) Q3 Earnings Top, Profit Shoots Up

Steel Dynamics (STLD) envisions steel consumption to remain strong based on strong domestic steel demand fundamentals and customer optimism.

Steel Dynamics, Inc. STLD saw its profits surge in third-quarter 2018, driven by strong domestic steel demand, higher steel product pricing and record steel shipments.

The steel maker logged profit of $398 million or $1.69 per share in the quarter, up from $153 million or 64 cents a year ago. Earnings per share topped the Zacks Consensus Estimate of $1.65.

Net sales in the quarter shot up around 32% year over year to $3,223.5 million, surpassing the Zacks Consensus Estimate of $3,165 million.

Steel Dynamics, Inc. Price, Consensus and EPS Surprise

 

Steel Dynamics, Inc. Price, Consensus and EPS Surprise

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

Segment Highlights

Net sales from the company's steel operations went up roughly 39% year over year to $2,475 million in the reported quarter. Operating income surged roughly two-fold year over year to $577.3 million. Average product selling price for the unit increased around 27% year over year to $988 per ton in the quarter. Steel shipments improved around 12% year over year to a record 2.8 million tons.

The company's fabrication operations raked in sales of $250.6 million, up around 19% year over year. Operating income fell roughly 40% to $13.1 million.

Net sales from metals recycling operations rose around 11% year over year to $387.2 million. Operating income fell around 16% year over year to $17.8 million.

Financial Position

Steel Dynamics ended the quarter with cash and cash equivalents of around $884.3 million, down roughly 20% year over year. Long-term debt was $2,352 million, flat year over year.

The company generated cash flow from operations of $420 million in the quarter. The company also repurchased shares worth $193 million during the first nine months of 2018.

Outlook

Steel Dynamics said that market and macroeconomic conditions are positioned to benefit domestic steel consumption. The company envisions steel consumption to remain strong and grow into 2019 based on customer optimism across the market sectors and strong underlying domestic steel demand fundamentals. The company believes that these along with its expansion actions are firm drivers for its sustained growth.

Steel Dynamics is also progressing well with the integration of the recent Heartland buyout and is on track to attain its expected annual run-rate of between 800,000 tons and 900,000 tons of cold roll, pickled & oiled, and galvanized flat roll steel by mid-2019.   

The company also noted that it remains focused on delivering shareholder value and strengthening its financial position through strong cash flow generation and execution of its long-term strategy.

Price Performance

Shares of Steel Dynamics have gained 5.6% over a year against the industry’s decline of 7.7%.



 

Zacks Rank & Other Stocks to Consider
 
Steel Dynamics currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the basic materials space include Methanex Corporation MEOH, KMG Chemicals, Inc. KMG and CF Industries Holdings, Inc. CF, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex has an expected long-term earnings growth rate of 15%. The company’s shares have gained around 10% over the past six months.

KMG Chemicals has an expected long-term earnings growth rate of 28.5%. The company’s shares are up roughly 14% over the past six months.

CF Industries has an expected long-term earnings growth rate of 6%. The company’s shares have gained around 30% over the past six months.

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