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Steel Dynamics (STLD) Q4 Earnings & Sales Trump Estimates

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Steel Dynamics, Inc. (STLD - Free Report) logged profit (as reported) of $305 million or $1.28 per share in fourth-quarter 2017, marking a significant increase from $20 million or 8 cents recorded a year ago.

The bottom line in the reported quarter was boosted by a one-time tax benefit of $181 million, resulting from the company's revaluation of its deferred tax assets and liabilities related to the recently enacted U.S. Federal Tax Cuts and Jobs Act of 2017.

Barring one-time gains and costs, adjusted earnings came in at 54 cents per share for the reported quarter, topping the Zacks Consensus Estimate of 49 cents.

Net sales for the quarter went up around 22% year over year to $2,336.5 million, also surpassing the Zacks Consensus Estimate of $2,173 million.

Steel Dynamics, Inc. Price, Consensus and EPS Surprise

 

Steel Dynamics, Inc. Price, Consensus and EPS Surprise | Steel Dynamics, Inc. Quote

FY17 Results

For 2017, profit was $813 million or $3.36 per share, a more than two-fold increase from $382.1 million or $1.56 per share recorded a in 2016. Adjusted net income was $641 million or $2.65 per share for 2017.

Net sales for 2017 were a record $9,538.8 million, up around 23% year over year. The company’s steel and fabrication operations achieved record shipments in 2017. 

Segment Highlights

Net sales from the company's steel operations for the fourth quarter went up roughly 20% year over year to $1,669.4 million. Operating income, however, fell roughly 5% year over year to $207.4 million.

The company's fabrication operations raked in sales of $220.5 million, up around 27% year over year. Operating income rose roughly 21% year over year to $21.6 million.

Net sales from Steel Dynamics’ metals recycling operations spiked around 25% year over year to $354.5 million. Operating income increased more than two-fold year over year to $22.4 million.

Financial Position

Steel Dynamics ended 2017 with cash and cash equivalents of around $1,028.6 million, up roughly 22% year over year. Long-term debt was $2,353.1 million, essentially flat year over year.

The company generated cash flow from operations of $740 million in 2017.

Outlook

Moving ahead, Steel Dynamics said that it sees the prevailing and expected macroeconomic and market conditions to benefit domestic steel consumption this year. Demand for steel in the domestic markets remains healthy while demand and pricing have structurally improved globally. 

Steel Dynamics believes steel consumption in the automotive market in North America to be steady and the company continues to gain momentum in that space. It also sees sustained additional growth across the construction and energy sectors. The company also noted that it expects the recent tax reform to provide an impetus for additional domestic fixed asset investment and growth.

Steel Dynamics continues to generate strong cash flows and strengthen financial position. The company noted that it remains well poised for growth and is committed to deliver shareholder value through strategic and organic growth opportunities.

Price Performance

Steel Dynamics has outperformed the industry it belongs to over the past three months. The company’s shares rallied 19.7% over this period compared with the industry’s 18.9% gain.



 

Zacks Rank and Stocks to Consider

Steel Dynamics is a Zacks Rank #1 (Strong Buy) stock.

Other stocks worth considering in the basic materials space include Methanex Corporation MEOH, Huntsman Corporation HUN and Air Products and Chemicals, Inc. APD. While Methanex carries a Zacks Rank #1, both Huntsman and Air Products sport a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex has an expected long-term earnings growth of 15%. Its shares are up roughly 28% over a year.

Huntsman has an expected long-term earnings growth of 8%. The stock has gained around 62% over a year.

Air Products has an expected long-term earnings growth of 14.1%. The stock has gained around 14% over a year.

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