Steel Dynamics, Inc. STLD issued its earnings guidance for fourth-quarter 2020.
The steel producer expects earnings per share (EPS) for the fourth quarter between 72 cents and 76 cents. Barring the costs associated with refinancing activities in October 2020 and construction of company’s Sinton Texas Flat Roll Steel Mill growth investment, the company anticipates adjusted EPS to be between 80 cents and 84 cents.
Based on the company’s analysis of its noncore oil and gas investments, it expects asset impairment charges during fourth quarter of around $10-15 million (after tax). However, the potential asset impairment has not been included in the guidance.
The guidance suggests a sequential rise from EPS of 47 cents recorded in third-quarter 2020 and year-over-year increase from 56 cents in the prior-year quarter. Also, adjusted EPS was 51 cents in the prior quarter and 62 cents in the prior-year quarter.
Fourth-quarter earnings from the company’s operations are expected to be higher sequentially due to flat roll metal spread expansion and steady total steel shipments. Domestic demand for steel continues to be strong, as automotive and construction sectors gain momentum. Higher selling value for steel and order entry activity is backed by strong demand and historically low steel inventories.
Earnings from the company’s metal recycling operations are also expected to be higher than third-quarter levels on significantly improved metal margins. Demand for ferrous scrap has also strengthened.
However, earnings for the company’s steel fabrication operations in the fourth quarter are expected to be lower than third-quarter levels. The downside is likely to be caused by lower seasonal shipments and metal spread compression thanks to decline in average industry selling value and increase in steel input costs.
Shares of Steel Dynamics have increased 5% in the past year compared with 16.6% rise of the industry.
Zacks Rank & Other Key Picks
Steel Dynamics currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks worth considering in the basic materials space are Bunge Limited BG, BHP Group BHP and Clearwater Paper Corporation CLW.
Bunge has a projected earnings growth rate of 43% for the current year. The company’s shares have gained around 15% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BHP has an expected earnings growth rate of around 32.4% for the current year. The company’s shares have gained around 20.3% in the past year. It currently flaunts a Zacks Rank #1.
Clearwater has an expected earnings growth rate of 1,960.9% for the current year. The company’s shares have surged around 67.6% in the past year. It currently carries a Zacks Rank #2 (Buy).
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