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Steel Dynamics (STLD) Q1 Earnings Top on Strong Demand

Steel Dynamics, Inc. STLD logged profit of $227.6 million or 96 cents per share in first-quarter 2018, marking a 13% increase from $200.8 million or 82 cents recorded a year ago. The results topped the Zacks Consensus Estimate of 91 cents.

The company gained from higher demand and pricing in the first quarter. Domestic steel demand remained strong across automotive and construction sectors while energy and general industrial demand improved during the quarter.  

Net sales for the quarter went up around 10% year over year to $2,603.9 million, coming ahead of the Zacks Consensus Estimate of $2,581 million.

Steel Dynamics, Inc. Price, Consensus and EPS Surprise

 

Steel Dynamics, Inc. Price, Consensus and EPS Surprise | Steel Dynamics, Inc. Quote

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Segment Highlights

Net sales from the company's steel operations went up roughly 12% year over year to $1,921.8 million. Operating income, however, fell roughly 4% year over year to $338.4 million. Average product selling price for the unit increased around 11% year over year to $822 per ton in the quarter.  

The company's fabrication operations raked in sales of $201.5 million, up around 4% year over year. Operating income fell roughly 17% year over year to $19.8 million.

Net sales from Steel Dynamics’ metals recycling operations rose around 7% year over year to $388.1 million. Operating income increased around 31% year over year to $27.8 million.

Financial Position

Steel Dynamics ended the quarter with cash and cash equivalents of around $985.8 million, up roughly 2% year over year. Long-term debt was $2,353.7 million, essentially flat year over year.

The company generated cash flow from operations of $178 million in the quarter.

Outlook

Moving ahead, Steel Dynamics said that it sees the prevailing and expected macroeconomic and market conditions to benefit domestic steel consumption this year. Demand for steel in the domestic markets remains strong while demand and pricing have improved globally. The company expects price momentum and growth in steel demand to continue through 2018.

Steel Dynamics also envisions the recent U.S. steel trade actions to result in lower imports in 2018. The company also noted that it expects the recent tax reform to provide an impetus for additional domestic fixed asset investment and growth. This coupled with the company’s expansion initiatives will drive growth in 2018, Steel Dynamics added.

Steel Dynamics also continues to generate strong cash flows and strengthen financial position. The company noted that it remains well poised for growth and is committed to deliver shareholder value through strategic and organic growth opportunities.
 
Price Performance

Steel Dynamics has outperformed the industry it belongs to over the past year. The company’s shares rallied 44.7% over this period compared with the industry’s 34.4% gain.



 

Zacks Rank and Other Stocks to Consider

Steel Dynamics is a Zacks Rank #1 (Strong Buy) stock.

Other companies in the basic materials space worth considering include Kronos Worldwide, Inc. KRO, Methanex Corporation MEOH and Eastman Chemical Company EMN.

Kronos sports a Zacks Rank #1 and has an expected long-term earnings growth rate of 5%. Its shares have rallied roughly 53% over a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex carries a Zacks Rank #2 (Buy) and has an expected long-term earnings growth rate of 15%. Its shares have gained around 49% over a year.

Eastman Chemical has an expected long-term earnings growth rate of 8.9% and carries a Zacks Rank #2. Its shares have gained around 38% over a year.

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