Steel Dynamics Reports Impressive Q2 Sales; Street Says Buy

Shares of Steel Dynamics (STLD) slipped about 1% in the extended trading session on Monday as the company’s Q2 earnings missed consensus estimates. However, the steel products manufacturer and metal recycler was able to surpass revenue expectations.

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Quarterly adjusted earnings of $3.40 came below the Street’s expectations of $3.42, but increased significantly from $0.47 reported in the year-ago quarter.

Revenues more than doubled to $4.5 billion in the second quarter and surpassed consensus estimates of $4.21 billion. Robust demand for steel and higher steel selling values drove the sales.

Operating income for the company’s steel operations was a record $1 billion due to significant metal spread expansion and record quarterly steel shipments. This compared favorably with $172.4 million registered in the same period last year. (See Steel Dynamics stock chart on TipRanks)

Chairman and CEO at Steel Dynamics Mark D. Millett said, “We continue to see strong steel demand coupled with extremely low customer steel inventories throughout the supply chain. The automotive sector continues to be strong, despite the electronic chip shortage, and other sectors such as construction, equipment and transportation remain solid.”

The company seeks to invest $450-500 million in four additional value-added flat roll steel coating lines — one of which is targeted to be set up in the Southern U.S.

Last month, JPMorgan analyst Michael Glick initiated coverage on the stock with a Buy rating and price target of $107 (upside potential of 84.8% from current levels).

Glick noted that the company is one of the highest quality mini-mill steel producers in the U.S., and sees the timing of its Texas steel mill to be ideal.

The stock has a Strong Buy consensus based on the 7 Buys and 1 Hold. The average Steel Dynamics price target of $75.75 implies 28% upside potential from current levels. Shares have gained 58% so far this year.