Steel Dynamics, Inc. STLD recently completed the sale of $500 million total principal amount of 3.25% notes due 2031 and $400 million total principal amount of 2.4% notes due 2025. The company will use the net proceeds to redeem $500 million of its 5.5% senior notes due 2024 (2024 Notes) and $400 million of its 5.25% senior notes due 2023 (2023 Notes).
Since October 2019, Steel Dynamics has been extending its debt maturity profile and lowering annual interest costs. The company is also committed to maintain its investment grade credit ratings.
Further, Steel Dynamics has called for redemption of $500 million of the 2024 Notes and $400 million of the 2023 Notes. The redemption date for these notes is Jul 5, 2020. The redemption price for the 2024 Notes will be at 102.75% and for the 2023 Notes will be at 100.875% along with any accrued and unpaid interest, but excluding the redemption date.
At the end of the first quarter, Steel Dynamics had long-term debt of around $2,646 million, up 12.4% year over year. Its cash and cash equivalents rose 28% year over year to $1,235.5 million.
Shares of Steel Dynamics have gained 10.3% in the past year against the industry’s 18.7% decline.
In first-quarter earnings call, Steel Dynamics stated that it is too early to establish the full scope of the coronavirus impact on global economies and the related impact on domestic steel demand. The company noted that domestic steel orders from certain sectors have slowed significantly due to the temporary closures, especially the domestic automotive production and its related supply chain. Also, weakness in energy sector has impacted flat roll steel demand.
While some construction projects have been disrupted or postponed, fundamental aspects of the sector are intact. The company’s steel order activities from construction along with strong steel fabrication order backlog also supports this trend. Steel Dynamics believes that steel demand will likely respond quickly when the economy reopens.
Moreover, the company is positive on its new state-of-the art, electric-arc-furnace (EAF) flat roll steel mill. The strategic project is expected to create long-term value through geographic and value-added product diversification.
Zacks Rank & Key Picks
Steel Dynamics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space are The Scotts Miracle-Gro Company SMG, Royal Gold, Inc. RGLD and Franco-Nevada Corporation FNV, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Scotts Miracle-Gro has an expected earnings growth rate of 21.5% for fiscal 2020. The company’s shares have surged 51.2% in the past year.
Royal Gold has an expected earnings growth rate of 66.2% for fiscal 2020. Its shares have returned 32.5% in the past year.
Franco-Nevada has an expected earnings growth rate of 19.2% for 2020. The company’s shares have surged 67.3% in the past year.
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