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Steel Dynamics' (STLD) Earnings and Sales Top Estimates in Q1

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Steel Dynamics, Inc.’s (STLD - Free Report) logged net income of $187.3 million or 88 cents per share in first-quarter 2020, down from $204.3 million or 91 cents in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of 86 cents.

Net sales in the quarter fell 8.6% year over year to $2,575.1 million. Nevertheless, the figure beat the Zacks Consensus Estimate of $2,550.4 million.

Steel Dynamics, Inc. Price, Consensus and EPS Surprise


Steel Dynamics, Inc. Price, Consensus and EPS Surprise

Steel Dynamics, Inc. price-consensus-eps-surprise-chart | Steel Dynamics, Inc. Quote


Segment Highlights

Net sales in the company's steel operations declined 8.6% year over year to $1,941.7 million in the first quarter. Operating income fell 6.3% year over year to $292.7 million. Average product selling price for the unit declined 14.2% year over year to $774 per ton in the reported quarter. Steel shipments rose 6.1% year over year to roughly 2.85 million tons.

The company's fabrication operations raked in sales of $220.9 million, down 3.3% year over year. Operating income rose 41.3% to $29.2 million on a year-over-year basis.

Net sales in metals recycling operations fell 19.9% year over year to $291.9 million. The segment’s operating income declined 58.3% year over year to $8.3 million.

Financial Position

Steel Dynamics ended the first quarter with cash and cash equivalents of $1,235.5 million, up 28% year over year. Long-term debt was around $2,646 million, up 12.4% year over year.

The company generated $211 million of cash flow from operations in the first quarter. The company also repurchased shares worth $107 million of its common stock in the quarter.


Steel Dynamics stated that it is too early to establish the full scope of the coronavirus impact on global economies and the related impact on domestic steel demand. The company noted that domestic steel orders from certain sectors have slowed significantly due to the temporary closures, especially the domestic automotive production and its related supply chain. Also, weakness in energy sector has impacted flat roll steel demand.

While some construction projects have been disrupted or postponed, fundamental aspects of the sector remain intact. The company’s steel order activities from construction along with strong steel fabrication order backlog also supports this trend. Steel Dynamics believes that steel demand will likely respond quickly when the economy reopens.

Moreover, the company remains positive on its new state-of-the art, electric-arc-furnace (EAF) flat roll steel mill. The strategic project is expected to create long-term value through geographic and value-added product diversification.

Price Performance

Shares of Steel Dynamics have lost 30% in the past year compared with the industry’s 44.3% decline.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are Newmont Corporation (NEM - Free Report) , Franco-Nevada Corporation (FNV - Free Report) and Novagold Resources Inc. (NG - Free Report) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Newmont has an expected earnings growth rate of 87.1% for fiscal 2020. The company’s shares have surged 83% in the past year.

Franco-Nevada has an expected earnings growth rate of 15.9% for 2020. Its shares have returned 76.5% in the past year.    

Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. The company’s shares have soared 184.9% in the past year.

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