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Steel Dynamics Projects Lower Steel Operations Profits in Q4

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Steel Dynamics, Inc. (STLD - Free Report) has issued earnings guidance for fourth-quarter 2019.

The steel producer expects earnings per share (EPS) in the range 49-53 cents for the fourth quarter. The projected figure suggests a fall from 69 cents recorded in the third quarter and $1.17 in the year-ago quarter.  

Barring one-time items stemming from costs related to refinancing activities and planned annual maintenance outages at the Butler and Columbus flat roll divisions, the company expects adjusted EPS in the range 55-59 cents.

The Zacks Consensus Estimate for fourth-quarter earnings is currently pegged at 58 cents, which calls for year-over-year decline of 55.7%.

Considering the two planned outages, margin compression due to lower steel prices and seasonally lower shipments, the company expects profitability from steel operations to be sequentially lower in the fourth quarter. However, Steel Dynamics believes that the underlying domestic steel demand is intact for the primary steel consuming sectors. Moreover, customers have been positive regarding the business prospects for 2020.

The company expects metals recycling platform results to decline sequentially in the fourth quarter due to lower average selling values and ferrous shipments.

Steel Dynamics expects performance of the steel fabrication business to slightly decline from third-quarter levels mainly due to margin compression. This is because average product pricing declined more than the company’s steel input costs. Moreover, the company stated that demand is strong and it expects to witness record shipments in the fourth quarter.

Steel Dynamics is witnessing strong steel fabrication order backlogs. Also, customers are optimistic regarding non-residential construction projects in 2020.

Steel Dynamics’ shares have gained 12.7% in in the past year against the industry’s 3.4% decline.



Zacks Rank & Key Picks

Steel Dynamics currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Kirkland Lake Gold Ltd , Impala Platinum Holdings Ltd (IMPUY - Free Report) and Polymetal International plc , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kirkland Lake Gold has an expected earnings growth rate of 97.1% for 2019. The company’s shares have surged 65.1% in the past year.

Impala Platinum Holdings has projected earnings growth rate of 255.2% for fiscal 2020. The company’s shares have skyrocketed 267% in a year.

Polymetal International has an estimated earnings growth rate of 40.5% for the current year. Its shares have returned 42.6% in the past year.

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