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Steel Dynamics (STLD) Down 2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Steel Dynamics (STLD - Free Report) . Shares have lost about 2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Steel Dynamics due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Steel Dynamics' Q4 Earnings and Sales Beat Estimates

Steel Dynamics recorded a net income of $635 million or $3.61 per share in the fourth quarter of 2022, reflecting a decline of 41.8% from the year-ago quarter profit of $1,090.5 million or $5.49 a share.

The company posted adjusted earnings of $4.37 per share, down 24.4% from the year-ago quarter’s $5.78. It, however, surpassed the Zacks Consensus Estimate of $3.60.

The company’s net sales in the fourth quarter were $4,826.2 million, which beat the Zacks Consensus Estimate of $4,732.1 million. Net sales declined around 9.1% from $5,310.7 million reported in the prior-year quarter.

Segment Highlights

Net sales for the company’s steel operations were $2,937 million in the fourth quarter, which reflects a decline of 22.4% year over year. The segment’s operating income in the reported quarter was $178.5 million, down roughly 86.9%. Steel operations suffered from seasonal factors resulting in sequentially lower shipments. Also, higher raw materials costs amplified the metal spread compression in the fourth quarter. The average external product selling price fell 32.4% year over year to $1,124 per ton.

Net sales for the company’s Metal’s recycling operations were $463.3 million in the fourth quarter, reflecting a decline of 15.9% from the prior-year quarter. The segment’s operating income was $14.2 million, roughly 67.3% lower year over year. Strong shipment volumes and increased metal margins acted as tailwinds for this segment. However, these were partly offset by lower selling values for ferrous and non-ferrous scraps.

The company's steel fabrication operations raked in sales of around $1,090 million, up around 60.3% year over year. The segment posted an operating income of approximately $682 million, up 187%. Stable realized selling values, low steel input costs and steady demand in the non-residential construction market boosted the segment’s performance in the fourth quarter.

FY22 Results

Adjusted earnings for full-year 2022 were $22.68 per share compared with $16.09 a year ago. Net sales increased 20.9% year over year to $22,260.8 million.

Financial Position

Steel Dynamics ended 2022 with cash and cash equivalents of $1,628.4 million, up 30.9% from the year-ago levels. Long-term debt was $3,013.2 million, essentially flat year over year.

The company generated $4.5 billion of cash flow from operations in 2022. It also repurchased $1.8 billion of its common stock during the year.

Outlook

Steel Dynamics stated that customer order entry activity remains healthy across its businesses. The company believes firm steel pricing and solid order activity will benefit its performance moving ahead. Also, the company anticipates that steel consumption will ramp up in North America in 2023 and steel pricing will be supported by high demand for lower-carbon-free emission steel, high usage of U.S.-produced steel products and lower volumes of imports.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Steel Dynamics has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Steel Dynamics has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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