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Steel Dynamics (STLD) Gives Q1 View, Sees Lower Flat Roll Profit

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Steel Dynamics, Inc. STLD announced earnings guidance for first-quarter 2022 of between $5.55 and $5.59 per share. The company’s guidance for adjusted earnings is in the range of $5.85-$5.89 per share, excluding the impact from costs related to the startup of its Sinton Texas Flat Roll Steel Mill growth investment of roughly $83 million or 30 cents per share.

The company’s fourth-quarter earnings and adjusted earnings were $5.49 and $5.78 per share, respectively. Earnings and adjusted earnings in the prior-year quarter were $2.03 and $2.10 per share, respectively.

The company expects first-quarter profitability from its steel operations to be historically strong but considerably lower than record fourth-quarter 2021 results. The upside will be backed by lower earnings from the company's flat roll steel operations, as average expected flat roll pricing is expected to fall by more than 10%. The downside will more than offset projected higher shipments and reduced average scrap prices.

The flat roll steel prices have recently strengthened with extending lead-times and projections for further improvements based on increased input costs and global flat roll steel supply disruptions along with a continuing strong demand environment. The automotive, construction, and industrial sectors continue to drive demand for steel.

It is expected that metal recycling operations for the first quarter will be in-line with sequential fourth quarter results, based on improved metal margins offsetting modestly lower volume. The steel fabrication operations are forecast to almost double record fourth-quarter results, as higher selling values and strong shipments offset slightly higher steel input costs in the first quarter. The non-residential construction sector remains strong as reflected by robust order activity, Steel Dynamics noted.

The company bought back $362 million, or 3% of its common stock during the first quarter through Mar 11, 2022. Its board also increased its first quarter cash dividend 31% and approved an additional $1.25 billion share repurchase authorization in February 2022.

Shares of Steel Dynamics have surged 58.4% in the past year compared with a 22% rise of the industry.

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Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are The Mosaic Company MOS, AdvanSix Inc. ASIX and Allegheny Technologies Incorporated ATI.

Mosaic has a projected earnings growth rate of 106.4% for the current year. The Zacks Consensus Estimate for MOS' current-year earnings has been revised 22.2% upward in the past 60 days.

Mosaic beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It has a trailing four-quarter earnings surprise of roughly 3.7%, on average. MOS has rallied around 72% in a year and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AdvanSix has a projected earnings growth rate of 61.8% for the current year. The Zacks Consensus Estimate for ASIX’s current-year earnings has been revised 55% upward in the past 60 days.

AdvanSix beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 23.6%. ASIX has surged 82.7% in a year. The company carries a Zacks Rank #1.

Allegheny, currently carrying a Zacks Rank #1, has an expected earnings growth rate of 661.5% for the current year. The Zacks Consensus Estimate for ATI's earnings for the current year has been revised 45.6% upward in the past 60 days.

Allegheny beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 127.2%. ATI has rallied around 22.7% over a year.


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