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Steel Dynamics Sees Lower Q4 Earnings on Maintenance Outages
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Steel Dynamics, Inc. (STLD - Free Report) has provided downbeat earnings guidance for fourth-quarter 2018 as it expects costs associated with significant maintenance outages to dent its profits for the quarter.
The steel maker expects earnings for the quarter in the band of $1.11 to $1.15 per share. That is a decrease from $1.69 per share recorded in the previous quarter and $1.28 per share it earned a year ago.
The company expects earnings for the fourth quarter to be hit by (a roughly $14 million impact) planned outage at its liquid pig iron production facility to complete a major maintenance. It also sees significant planned maintenance outages at its two flat roll steel mills to hurt profitability for the quarter. The company envisions higher-than-normal maintenance and associated costs of roughly $20 million. Per Steel Dynamics, the outages also lowered fourth-quarter shipments across these facilities by an estimated 70,000-80,000 tons.
Excluding one-time items (including maintenance outage costs), adjusted earnings for the quarter is projected in the range of $1.25 to $1.29 a share. Analysts polled by Zacks currently expect earnings of $1.35 per share for the quarter.
The company expects profitability from its steel operations to be lower sequentially in the fourth quarter due to reduced earnings from its flat roll operations. Its flat roll operations saw increased maintenance costs and reduced shipments resulting from significant outages across Butler and Columbus locations.
Earnings from the company's metals recycling platform are projected to rise sequentially in the fourth quarter on the back of improved recycled non-ferrous metal spread and shipments. The company also sees an improvement in recycled ferrous metal margin.
Steel Dynamics also expects profits from its steel fabrication business to improve on sequential-comparison basis. Average sales prices are forecast to rise sequentially and more than offset seasonally reduced shipments. The company is witnessing strong steel fabrication order activity and backlogs.
For full-year 2018, Steel Dynamics expects record annual earnings, significantly higher than its earlier record logged in 2017. The company anticipates steel consumption and market dynamics to remain strong in 2019 factoring in strong steel demand fundamentals and customer optimism. The company is also optimistic about delivering strong free cash flows.
Steel Dynamics’ shares have lost 26.1% year to date, modestly underperforming its industry’s 25% decline.
Steel Dynamics, in its third-quarter call, said that it is progressing well with the integration of the recent Heartland acquisition and is on track to attain its expected annual run-rate of between 800,000 tons and 900,000 tons of cold roll, pickled & oiled, and galvanized flat roll steel by mid-2019.
Steel Dynamics is currently executing a number of projects that should add to capacity. The company, last month, said that it will invest $1.7-$1.8 billion to build a new electric-arc-furnace (“EAF”) flat roll steel mill in the United States that is expected to have a production capacity of roughly 3 million tons annually. It will have the capability to make the latest generation of advanced high strength steel products.
The project is expected to create around 600 well-paying positions with opportunities for indirect job growth from other support service providers. It will include value-added finishing lines including a galvanizing line with an annual capacity of 450,000 tons as well as a paint line with an annual coating capacity of 250,000 tons.
The company expects this investment to allow it to cost effectively serve the customers in this growing flat roll steel consuming region and enhance its steelmaking capacity and value-added product capability.
Better-ranked stocks worth considering in the basic materials space include The Mosaic Company (MOS - Free Report) , Israel Chemicals Ltd. (ICL - Free Report) and Cameco Corporation (CCJ - Free Report) .
Mosaic has an expected earnings growth rate of 75.2% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have rallied 24% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Israel Chemicals has an expected earnings growth rate of 19.4% for the current year and carries a Zacks Rank #2. The company’s shares have rallied 34% over the past year.
Cameco has an expected earnings growth rate of 66.7% for the current year and carries a Zacks Rank #2. The company’s shares have gained 14% in the past year.
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Steel Dynamics Sees Lower Q4 Earnings on Maintenance Outages
Steel Dynamics, Inc. (STLD - Free Report) has provided downbeat earnings guidance for fourth-quarter 2018 as it expects costs associated with significant maintenance outages to dent its profits for the quarter.
The steel maker expects earnings for the quarter in the band of $1.11 to $1.15 per share. That is a decrease from $1.69 per share recorded in the previous quarter and $1.28 per share it earned a year ago.
The company expects earnings for the fourth quarter to be hit by (a roughly $14 million impact) planned outage at its liquid pig iron production facility to complete a major maintenance. It also sees significant planned maintenance outages at its two flat roll steel mills to hurt profitability for the quarter. The company envisions higher-than-normal maintenance and associated costs of roughly $20 million. Per Steel Dynamics, the outages also lowered fourth-quarter shipments across these facilities by an estimated 70,000-80,000 tons.
Excluding one-time items (including maintenance outage costs), adjusted earnings for the quarter is projected in the range of $1.25 to $1.29 a share. Analysts polled by Zacks currently expect earnings of $1.35 per share for the quarter.
The company expects profitability from its steel operations to be lower sequentially in the fourth quarter due to reduced earnings from its flat roll operations. Its flat roll operations saw increased maintenance costs and reduced shipments resulting from significant outages across Butler and Columbus locations.
Earnings from the company's metals recycling platform are projected to rise sequentially in the fourth quarter on the back of improved recycled non-ferrous metal spread and shipments. The company also sees an improvement in recycled ferrous metal margin.
Steel Dynamics also expects profits from its steel fabrication business to improve on sequential-comparison basis. Average sales prices are forecast to rise sequentially and more than offset seasonally reduced shipments. The company is witnessing strong steel fabrication order activity and backlogs.
For full-year 2018, Steel Dynamics expects record annual earnings, significantly higher than its earlier record logged in 2017. The company anticipates steel consumption and market dynamics to remain strong in 2019 factoring in strong steel demand fundamentals and customer optimism. The company is also optimistic about delivering strong free cash flows.
Steel Dynamics’ shares have lost 26.1% year to date, modestly underperforming its industry’s 25% decline.
Steel Dynamics, in its third-quarter call, said that it is progressing well with the integration of the recent Heartland acquisition and is on track to attain its expected annual run-rate of between 800,000 tons and 900,000 tons of cold roll, pickled & oiled, and galvanized flat roll steel by mid-2019.
Steel Dynamics is currently executing a number of projects that should add to capacity. The company, last month, said that it will invest $1.7-$1.8 billion to build a new electric-arc-furnace (“EAF”) flat roll steel mill in the United States that is expected to have a production capacity of roughly 3 million tons annually. It will have the capability to make the latest generation of advanced high strength steel products.
The project is expected to create around 600 well-paying positions with opportunities for indirect job growth from other support service providers. It will include value-added finishing lines including a galvanizing line with an annual capacity of 450,000 tons as well as a paint line with an annual coating capacity of 250,000 tons.
The company expects this investment to allow it to cost effectively serve the customers in this growing flat roll steel consuming region and enhance its steelmaking capacity and value-added product capability.
Steel Dynamics, Inc. Price and Consensus
Steel Dynamics, Inc. Price and Consensus | Steel Dynamics, Inc. Quote
Zacks Rank & Stocks to Consider
Steel Dynamics is a Zacks Rank #3 (Hold) stock.
Better-ranked stocks worth considering in the basic materials space include The Mosaic Company (MOS - Free Report) , Israel Chemicals Ltd. (ICL - Free Report) and Cameco Corporation (CCJ - Free Report) .
Mosaic has an expected earnings growth rate of 75.2% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have rallied 24% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Israel Chemicals has an expected earnings growth rate of 19.4% for the current year and carries a Zacks Rank #2. The company’s shares have rallied 34% over the past year.
Cameco has an expected earnings growth rate of 66.7% for the current year and carries a Zacks Rank #2. The company’s shares have gained 14% in the past year.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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