A month has gone by since the last earnings report for Steel Dynamics (
STLD Quick Quote STLD - Free Report) . Shares have added about 2.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Steel Dynamics due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Steel Dynamics' Q3 Earnings & Revenues Beat Estimates
Steel Dynamics logged a net income of $991 million or $4.85 per share in third-quarter 2021, skyrocketing from $100 million or 47 cents in the year-ago quarter.
Barring one-time items, adjusted earnings per share came in at $4.96, marginally beating the Zacks Consensus Estimate of $4.95. Net sales in the quarter rose 118.3% year over year to $5,088.3 million. The top line beat the Zacks Consensus Estimate of $4,991.3 million. The company reported record quarterly net sales, operating income, adjusted EBITDA, and cash flow from operations in the quarter. The company experienced robust steel demand in the reported quarter while product pricing maintained its momentum across its entire steel platform. Higher selling prices also drove results significantly. Steel Dynamics recorded a significant rise in operating income in its steel operations while delivering strong results in its metals recycling operations amid declining scrap prices. Segment Highlights
Net sales in the company's steel operations rose 116.2% year over year to $3,667.7 million in the reported quarter. Operating income increased more than nine folds to $1,350.7 million. The average external product selling price for the unit rose 111.2% year over year to $1,550 per ton in the quarter. Steel shipments rose roughly 4.5% to around 2.8 million tons. Significant metal spread expansion drove operating income. Higher selling prices also more than offset higher scrap input costs.
The company's steel fabrication operations raked in sales of $493.8 million, up around 104.5% year over year. Operating income rose around 127.5% to $89.4 million on a year-over-year basis, aided by record shipments and higher realized pricing. Net sales in metals recycling operations increased nearly fourfold year over year to $587.1 million. The segment’s posted operating income of roughly $47 million appreciating 203.2%, supported by strong ferrous scrap margins offsetting slightly lower volumes with scrap prices moderating to some extent in August and September. Financial Position
Steel Dynamics ended the third quarter with cash and cash equivalents of $1,095.7 million, down around 13.6% year over year. Long-term debt was about $3,019.2 million, up 14.5%.
The company generated $631 million of cash flow from operations in the third quarter. Outlook
Steel Dynamics stated that it is witnessing strong steel demand with customer steel inventory staying historically low throughout the supply chain. The automotive and the construction end markets remain strong and the company anticipates the momentum to continue in the fourth quarter. The company is also seeing strong order entry activity across its businesses, which along with low inventory, is supporting strong steel selling values. Steel Dynamics envisions the momentum to continue throughout 2021 and expects its fourth-quarter earnings to represent another record performance. It remains optimistic regarding the steel market dynamics in North America.
Its investment in Sinton Texas Flat Roll Steel Mill investment represents transformational competitively advantaged strategic growth, with associated long-term value creation for shareholders, Steel Dynamics noted. Steel Dynamics anticipates shipments from Sinton to be between 2 million and 2.2 million tons in 2022 with through-cycle annual EBITDA in the range of $475 million to $525 million. Also, it is planning to invest around $500 million to build four additional value-added flat roll steel coating lines comprising two paint lines and two galvanizing lines with Galvalume coating capability at its new Texas mill. It expects these four lines to begin operating from mid-2023. Moreover, the company is committed to reducing its environmental footprint and aims for carbon-neutral steel mills by 2050. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 7.05% due to these changes.
At this time, Steel Dynamics has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Steel Dynamics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.