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Why Should You Add Steel Dynamics (STLD) to Your Portfolio?

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Steel Dynamics, Inc.'s STLD stock looks promising at the moment. The company has seen its shares pop around 10% over the last six months. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.

Let’s delve deeper into the factors that make this steel maker an attractive investment option.

What’s Working in Favor of STLD?

Solid Rank & VGM Score: Steel Dynamics currently sports a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment.

An Outperformer: Steel Dynamics has outperformed the industry over a year. The company’s shares have rallied around 44% over this period, compared with roughly 41% growth recorded by the industry.


Superior Return on Equity (ROE): Steel Dynamics’ ROE of 21.6%, as compared with the industry average of 13.8%, manifests the company’s efficiency in utilizing shareholder’s funds.

Solid Growth Prospects: The Zacks Consensus Estimate for earnings for 2018 for Steel Dynamics is currently pegged at $4.92, reflecting an expected year-over-year growth of 85.7%. The company also has an expected long-term earnings per share growth rate of 12%, higher than the industry average of 8.3%.

Upbeat Outlook: Steel Dynamics recently provided strong earnings guidance for second-quarter 2018. The company expects earnings for the quarter in the band of $1.46 to $1.50 per share. That is an increase from 96 cents per share recorded in the previous quarter and 63 cents per share it earned a year ago.

Steel Dynamics expects profitability from its steel operations to improve meaningfully on a sequential comparison basis in the second quarter on the back of higher steel shipments and metal spread expansion. Also, average quarterly steel product prices are expected to increase more than scrap costs. The company noted that prices of steel across the platform improved throughout the quarter aided by strong steel demand in the domestic market.

Steel Dynamics expects steel consumption and market dynamics to remain strong during 2018, supported by strong steel demand fundamentals and customer optimism.

Steel Dynamics continues to generate strong cash flows and strengthen financial position. The company also remains committed to deliver shareholder value through strategic and organic growth opportunities. The company should also benefit from its strategic acquisitions.

Steel Dynamics, last month, 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

Other Stocks to Consider

Other top-ranked stocks in the basic materials space worth considering include Westlake Chemical Corp. WLK, The Chemours Company CC and FMC Corp. FMC, each carrying a Zacks Rank #1. 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 72% over a year.

Chemours has an expected long-term earnings growth rate of 15.5%. The company’s shares have rallied around 28% in a year.

FMC has an expected long-term earnings growth rate of 14.3%. Its shares have gained roughly 17% over a year.

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