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Steel Dynamics Upbeat on Q3 Earnings, Sees Strong Demand

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Steel Dynamics, Inc. (STLD - Free Report) has issued guidance for third-quarter 2018. The company expects earnings per share (EPS) in the range of $1.60-$1.64, including estimated charges of $13 million or 4 cents related to the Heartland buyout.

Excluding these charges, adjusted earnings for the quarter is projected in the range of $1.64-$1.68 a share. Currently, the Zacks Consensus Estimate for earnings for the third quarter is pegged at $1.71.

Notably, the company’s projected figures are higher than earnings of $1.53 per share in second-quarter 2018 and 64 cents in the third quarter of 2017. The company expects profitability from steel operations to improve sequentially in the third quarter on the back of strong demand and significant metal spread expansion.

Moreover, the company expects average quarterly steel product pricing to increase more than the average scrap costs across the steel platform. This is likely to boost the profitability for sheet and long product steel operations. The company believes that market dynamics and steel consumption will remain strong, courtesy of customer optimism and strong steel demand fundamentals.

Earnings from the company's metals recycling platform are projected to decline sequentially due to a decline in recycled non-ferrous shipments and pricing. However, recycled ferrous volumes and metal spread are likely to remain steady for the quarter on the back steady domestic steel utilization.

Steel Dynamics also expects profits from its steel fabrication business to be steady on sequential-comparison basis. Despite a sequentially higher average shipments and sales prices, higher average steel input costs are likely to offset the positive demand fundamentals in the third quarter. The company is witnessing strong steel fabrication order activity and increase in order backlogs.

Shares of Steel Dynamics have rallied 39.6% in the past year, significantly outperforming the industry’s 4.3% rise.



Zacks Rank & Other Stocks to Consider

Steel Dynamics currently sports a Zacks Rank #1 (Strong Buy).

A few other top-ranked stocks in the basic materials space are Ingevity Corporation (NGVT - Free Report) , Celanese Corporation (CE - Free Report) and Trinseo S.A. (TSE - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ingevity has an expected long-term earnings growth rate of 12%. Its shares have moved up 68.5% in the past year.

Celanese has an expected long-term earnings growth rate of 10%. Its shares have gained 10.7% in the past year.

Trinseo has an expected long-term earnings growth rate of 12%. Its shares have returned 11.7% in a year.

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