Steel Dynamics (STLD) Up 2.2% Since Last Earnings Report: Can This Continue?

A month has passed since the last earnings report for Steel Dynamics (STLD). Shares rose about 2.2% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or will Steel Dynamics face a recession? Before we dive into the recent reaction from investors and analysts, let’s take a quick look at the company’s most recent earnings report in order to get a better handle on the important factors influencing the situation.

Steel Dynamics’s top earnings in the first quarter thanks to higher selling prices

Steel Dynamics reported first-quarter 2024 earnings of $3.67 per share, compared to $3.70 in the year-ago quarter. It surpassed the Zacks Consensus Estimate of $3.54.

First-quarter net sales fell about 4% year-over-year to $4.69 billion. It missed the Zacks Consensus Estimate of $4.74 billion.

Although the company experienced some volatility in steel orders at the beginning of the reporting quarter, steel demand remained stable during the quarter. Solid demand led to near-record deliveries and higher selling prices in the company’s steel business.

The most important information in the segment

Steel business net sales were approximately $3.37 billion in the reported quarter, up approximately 9% year-over-year. Steel Dynamics recorded steel shipments of approximately 3.3 million tonnes during the quarter. For comparison, our estimate is 3.45 million tons. The company observed high demand, mainly from the automotive, non-residential construction, energy and industrial sectors.

In the company’s steel division, the average outdoor sales price was $1,201 per ton, compared to $1,076 per ton in the year-ago quarter and $1,090 per ton in the prior quarter. It exceeded our estimate of $1,002 per tonne.

Net sales of Metal’s recycling business were $569.5 million in the quarter, down approximately 2% from the prior-year quarter. During the quarter, the company recorded deliveries of ferrous metals worth approximately 1.45 million gross tons, which remains stable year-on-year. This result was lower than our estimate of 1.56 million gross tons.

The company’s steel manufacturing business generated sales of approximately $447.2 million, down approximately 48% year-over-year. Steel Dynamics reported steel product shipments of 143,842 tonnes during the quarter, down approximately 17% year-over-year. This figure was lower than our estimate of 152,387 tonnes.

Financial position

Steel Dynamics ended the quarter with cash and cash equivalents of approximately $1.04 billion, down approximately 35% year-over-year. Long-term debt was approximately $2.61 billion, down approximately 13% from the same quarter last year.

During the reported quarter, the company generated operating cash flow of $355 million, down approximately 52% year-over-year. Maintained strong liquidity at $3.1 billion as of March 31, 2024.

During the quarter, the company repurchased $298 million of common stock, representing 1.5% of total shares outstanding.

The story continues

Perspectives

Steel Dynamics noted that market conditions exist to support robust domestic steel consumption in 2024. Across its divisions, order intake activity remains strong and steel prices have stabilized. The company expects steel consumption in North America to increase this year. Steel prices are expected to be supported by demand for lower carbon steel products made in the U.S. and lower imports. The company also predicts that the automotive, non-residential construction, industry and energy sectors will maintain a good position in 2024.

How have estimates changed since then?

Over the past month, investors have seen an upward trend in new estimates.

VGM results

At this point, Steel Dynamics’ average Growth Rating is a C, however its Momentum Score is doing much better with an A. Following the exact same trajectory, the stock is rated an A on the value side, placing it in the top 20% for this investment strategy.

Overall, the company’s Total VGM Score is A. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company generally show an upward trend, and the scale of these corrections looks promising. Notably, Steel Dynamics carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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