On Tuesday, BofA Securities maintained a neutral stance on Steel Dynamics (NASDAQ:STLD) stock, keeping its price target steady at $140.00.
The firm's analysis followed the steel producer's guidance for third-quarter 2024 earnings per share (EPS) of $1.94 to $1.98, slightly below Bloomberg and Visible Alpha's consensus of $2.11. However, the forecast surpassed BofA's estimated $1.81, primarily due to stronger performance in the Steel Operations segment.
Steel Dynamics' guidance for its Steel Fabrication and Metals Recycling divisions met BofA's projections. The company reported a consistent fabrication order backlog, with orders stretching into the first quarter of 2025 and pricing remaining favorable. This stability is seen as a positive indicator of the company's future.
Looking ahead, Steel Dynamics anticipates an increase in volumes for 2025. This expectation is based on declining interest rates and the influence of infrastructure programs and reshoring initiatives.
The company predicts these elements will boost demand for its fabrication services, including joists, decks, and upstream flat and long steel products.
Regarding pricing, BofA anticipates that hot-rolled-coil (HRC) prices will likely see a gradual uptick soon. However, the firm also expects that any significant price increases will be limited by the upcoming launch of the Big River Steel 2 project.
In conclusion, BofA Securities reaffirmed its Neutral rating on Steel Dynamics, suggesting that the potential for gains is balanced by the risks involved. The company's current outlook and market conditions appear to have been carefully weighed in this assessment.
In other recent news, Steel Dynamics has forecasted a dip in Q3 earnings, projecting them to be between $1.94 and $1.98 per diluted share, a decrease from Q2's earnings of $2.72 per diluted share.
Despite this, the company remains optimistic about steel demand and anticipates steady volumes to balance marginally lower realized pricing in its metal recycling operations.
Analysts from JPMorgan have revised their stance on Steel Dynamics, upgrading the stock rating from Underweight to Neutral, reflecting a more favorable view of the company's diversified operations.
Furthermore, Steel Dynamics has declared a Q3 dividend of $0.46 per share, demonstrating its commitment to shareholder value. The company also reported strong financial performance in Q2 2024, with revenues of $4.6 billion and an adjusted EBITDA of $686 million.
As part of its growth strategy, Steel Dynamics commissioned four new value-added flat-rolled steel coating lines and reported shipments of 3.2 million tons for the quarter.
Lastly, the company is progressing with its aluminum investments, expecting to turn EBITDA positive in the latter half of 2025. Despite declining steel pricing, Steel Dynamics sees strong market potential in Mexico for high-value products. These recent developments indicate the company's strategic advancements and robust financial foundation.
InvestingPro Insights
In light of BofA Securities' neutral stance on Steel Dynamics, recent data and insights from InvestingPro could provide investors with additional context. Steel Dynamics' management has been actively buying back shares, which can be a sign of confidence in the company's value and future prospects. Furthermore, the company boasts a high shareholder yield and has consistently raised its dividend for 11 consecutive years, evidencing a strong commitment to returning value to shareholders.
From a financial standpoint, Steel Dynamics' market capitalization stands at $17.13 billion, with an attractive price-to-earnings (P/E) ratio of 8.85, reflecting investor confidence in the company's earnings capacity. Despite a decline in revenue growth over the last twelve months, with a -11.27% change, the company's gross profit margin remains robust at 18.95%. This indicates that Steel Dynamics has been effective in maintaining profitability in a challenging market.
For investors seeking more comprehensive insights, InvestingPro offers additional tips, including the company's low price volatility and its ability to cover interest payments with cash flows, which can be found at https://www.investing.com/pro/STLD. With 11 more InvestingPro Tips available, investors can gain a deeper understanding of Steel Dynamics' financial health and market position.
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