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Here's Why Steel Dynamics (STLD) Should Be in Your Portfolio Now

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Steel Dynamics, Inc.'s (STLD - Free Report) stock looks promising at the moment. The company, sporting a Zacks Rank #1 (Strong Buy), has seen its shares pop around 19% over the last three months. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.

Let’s delve deeper into the factors that make this steel maker an attractive investment option.

What’s Working in Favor of STLD?

Strong Q4 and Upbeat Outlook: Steel Dynamics topped earnings and revenue expectations in fourth-quarter 2017. The company logged profit (as reported) of $305 million or $1.28 per share for the quarter, 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. Adjusted earnings of 54 cents per share for the quarter trounced 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 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.

An Outperformer: Steel Dynamics has outperformed the industry over the last six months. The company’s shares have rallied around 25% over this period, compared with roughly 20% gain recorded by the industry.


Estimates Northbound: Annual estimates for Steel Dynamics have moved north over the past month, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2018 has increased by around 21% to $3.87 per share. The Zacks Consensus Estimate for 2019 has also moved up 22% over the same timeframe to $4.13.

Superior Return on Equity (ROE): Steel Dynamics’ ROE of 21.5%, as compared with the industry average of 11.7%, manifests the company’s efficiency in utilizing shareholder’s funds.

Healthy Growth Prospects: The Zacks Consensus Estimate for earnings for 2018 for Steel Dynamics is currently pegged at $3.87, reflecting an expected year-over-year growth of 46%. Moreover, earnings are expected to register a 6.7% growth in 2019. The company also has an expected long-term earnings per share growth rate of 12%, higher than the industry average of 7%.

Steel Dynamics, Inc. Price and Consensus


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

Other Stocks to Consider

Other companies worth considering in the basic materials space include Olympic Steel, Inc. (ZEUS - Free Report) , Methanex Corporation (MEOH - Free Report) and The Mosaic Company (MOS - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Olympic Steel has an expected long-term earnings growth rate of 7.5%. Its shares have rallied 19% over the past six months.

Methanex has an expected long-term earnings growth rate of 15%. Its shares have rallied 29% over the past six months.

Mosaic has an expected long-term earnings growth rate of 9.5%. Its shares have rallied 19% over the past six months.

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