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Steel Dynamics (STLD) Stock Up 27% in 6 Months: Here's Why

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Shares of Steel Dynamics, Inc. STLD have popped around 27% over the last six months. The company has also outperformed its industry's growth of roughly 11% over the same time frame.  

Steel Dynamics, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $11.8 billion and average volume of shares traded in the last three months is around 2,301K. The company has expected long-term earnings per share growth of around 12%.

Let's take a look into the factors that are driving this steel maker.


Driving Factors

Forecast-topping earnings performance in the last reported quarter, upbeat outlook and the Trump administration’s trade actions on imported steel have contributed to the rally in Steel Dynamics' shares.

Steel Dynamics logged profit of $227.6 million or 96 cents per share in first-quarter 2018, marking a 13% increase from $200.8 million or 82 cents recorded a year ago. The results topped the Zacks Consensus Estimate of 91 cents.

The company gained from higher demand and pricing in the first quarter. Domestic steel demand remained strong across automotive and construction sectors while energy and general industrial demand improved.

Steel Dynamics expects the prevailing and expected macroeconomic and market conditions to benefit domestic steel consumption this year. Demand for steel in the domestic markets remains strong while demand and pricing have improved globally. The company expects price momentum and growth in steel demand to continue through 2018.

Steel Dynamics also envisions the U.S. steel trade actions to result in lower imports in 2018. The company also expects the recent tax reform to provide an impetus for additional domestic fixed asset investment and growth. This coupled with the company’s expansion initiatives are expected to drive growth in 2018.

The Trump administration has slapped a 25% tariff on steel imports aimed at protecting the U.S. steel industry which had long been struggling to cope with an influx of cheap imports. The tariffs are expected to lead to lower imports into the United States, which would in turn boost demand for American steel and drive profitability of U.S. steel makers. The tariffs would also provide a boost to steel prices and give American steel makers more pricing power.

Steel Dynamics, last month, also agreed to acquire Companhia Siderurgica Nacional, LLC (Heartland) from CSN Steel, S.L.U., for $400 million in cash. Heartland has the capability to produce 1 million tons of cold roll steel annually, with galvanizing capacity of 360,000 tons.

The buyout is expected to increase Steel Dynamics' total shipping capability and annual flat roll steel shipping capacity to 12.4 million tons and 8.4 million tons, respectively. The additional exposure to lighter-gauge and greater width flat roll steel offerings will also expand its portfolio of value-added products, strengthening Steel Dynamics’ position as a leading steel producer in North America.

Steel Dynamics, Inc. Price and Consensus


Steel Dynamics, Inc. Price and Consensus | Steel Dynamics, Inc. Quote

Stocks to Consider

Stocks worth considering in the basic materials space include Westlake Chemical Corporation WLK, The Chemours Company CC and Celanese Corporation CE, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied roughly 85% over a year.

Chemours has an expected long-term earnings growth rate of 15.5%. The company’s shares have gained around 21% in a year.

Celanese has an expected long-term earnings growth rate of 8.9%. Its shares have rallied roughly 33% over a year.

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