On Monday, Citi reaffirmed its Buy rating on Steel Dynamics (NASDAQ:STLD) stock, maintaining a price target of $160.00. The company's second quarter earnings per share (EPS) guidance of $2.64-2.68 was announced, falling short of Citi's $2.87 estimate and the consensus of $2.98. The implied EBITDA of approximately $701 million is roughly 6% below the consensus of $748 million according to Factset data.
Steel Dynamics signaled that earnings from the mills segment are expected to be significantly lower, a trend also noted by competitor Nucor Corporation (NYSE:NUE), but unlike Nucor, Steel Dynamics anticipates steady shipments.
The fabrication segment's earnings are projected to be on par with the first quarter of 2024, with improved shipments but reduced prices. Citi views the stable fabrication earnings as potentially setting a positive baseline, previously anticipated to occur in the third quarter of 2024.
The company also provided a positive outlook for the fabrication segment, citing a steel joist and deck order backlog that extends into the fourth quarter of 2024, accompanied by historically strong pricing. Citi expects the stock to perform in line with the market, as the encouraging news from the fabrication segment may balance out the lower-than-expected earnings guidance.
Notably, Steel Dynamics' EPS guidance is higher than that of Nucor, which is between $2.20 and $2.30, despite Steel Dynamics' share price being approximately 20% lower ($121 per share compared to Nucor's $155 per share). This comparison highlights Steel Dynamics' relative performance in the context of market expectations and competitor benchmarks.
In other recent news, Steel Dynamics has projected lower Q2 earnings between $2.64 and $2.68 per diluted share, a decrease from the preceding quarters. Despite this, the company's metals recycling operations are expected to see improved earnings due to increased volumes of both ferrous and nonferrous materials. Additionally, Steel Dynamics recently repurchased $247 million of its common stock, indicating ongoing confidence in its earnings and cash flow generation.
On the analyst front, Jefferies maintained a Hold rating on Steel Dynamics, citing concerns over valuation and increased capital expenditure. However, KeyBanc maintained a Sector Weight rating, acknowledging the company's robust free cash flow and potential for future growth. This led to a slight increase in earnings estimates for 2024 and 2025.
In other financial developments, Steel Dynamics has declared a quarterly cash dividend of $0.46 per common share, reflecting the company's commitment to delivering shareholder value.
Meanwhile, the company reported a strong Q1 performance with near-record steel shipments totaling 3.3 million tons and a net income of $584 million, bolstered by the launch of four new value-added flat rolled steel coating lines. These recent developments underscore Steel Dynamics' financial performance and potential for growth.
InvestingPro Insights
As Steel Dynamics (NASDAQ:STLD) navigates a challenging market environment, real-time data from InvestingPro provides additional context to the company's financial health and market performance. With a market capitalization of $18.96 billion and a P/E ratio that has adjusted to 7.91 over the last twelve months as of Q1 2024, Steel Dynamics showcases robust fundamentals. The company's commitment to shareholder value is underscored by a high shareholder yield and a track record of raising its dividend for 11 consecutive years, a streak that has been maintained for 21 years overall. This dedication to consistent returns is complemented by a strong free cash flow yield, as indicated by the company's valuation.
InvestingPro Tips highlight that management's strategy includes aggressive share buybacks, a move that may reflect confidence in the company's prospects and a commitment to delivering value to shareholders. Additionally, the company's ability to cover interest payments with its cash flows and maintain a moderate level of debt positions it well for financial stability. With analysts predicting profitability this year and a history of profitability over the last twelve months, Steel Dynamics appears resilient despite downward revisions in earnings estimates for the upcoming period by some analysts. Moreover, the company's stock is known for low price volatility, which may appeal to investors seeking a more stable equity investment.
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