Steel Dynamics shares rally following ‘better than expected’ Q4 EPS guidance

Steel Dynamics (NASDAQ:) shares jumped Friday after the company provided fourth-quarter earnings guidance, stating that steel order activity remains solid, evidenced by extended order lead times and recent pricing increases heading into the first quarter of 2024.

The company sees its earnings for the fourth quarter between $2.60 and $2.64 per share, compared to the company’s third-quarter earnings of $3.47 per share.

At the time of writing, STLD shares are up more than 5% at over $126 per share.

The company noted that Q4 profitability from the company’s steel operations is expected to be lower than its sequential third-quarter results, based on steady shipments and metal spread contraction. In addition, earnings from the company’s steel fabrication operations are expected to be lower sequentially from Q3, while earnings from its metals recycling operations are expected to be comparable to Q3.

STLD is set to release its Q4 2023 and full-year earnings after the markets close on Tuesday, January 23, 2024.

Reacting to the guidance announcement, analysts at BMO Capital said the update was “better than expected.”

“Steel Dynamics expects 4Q’23 EPS of $2.60-2.64, above our/consensus of $2.55/$2.43 (vs. 3Q’23 of $3.47),” analysts noted, with a Market Perform rating and $110 price target on the stock. “Looking ahead, STLD indicated order activity remains solid, which coupled with extended lead times has resulted in positive sheet pricing momentum.”

“Meanwhile, order activity in the downstream steel fabrication business has improved and prices stabilized, although no other specific information on current pricing was provided, with our channel check implying a more subdued pricing environment,” they added, mentioning that overall, it was a solid update.