Steel Dynamics (STLD) is set to release its third-quarter 2014 results after the bell on Oct 20.
In the last quarter, the Indiana-based steel maker delivered a 3.3% positive earnings surprise on double-digit sales gains across the board. Its segments recorded higher profits compared to the previous quarter, which was hit by bad weather. The sequential improvement was driven by record shipments and improved metal spreads, backed by strong demand with continued market diversification and customer focus.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Steel Dynamics’ results in the September quarter are expected to be supported by higher demand for its products. The recent growth projects will also contribute to the company’s earnings.
The automotive and manufacturing markets remain strong while domestic energy investments are expected to continue to strengthen, which augurs well for the company’s growth. Steel Dynamics is also seeing a pick-up in non-residential construction activities which should support results in its steel fabrications business.
Steel Dynamics is also well placed to gain from its recent acquisition of Severstal Columbus. The buyout, which the company completed last month, will expand its annual steel shipping capacity to 11 million tons, representing a roughly 40% rise.
Steel Dynamics gets an exposure to the high-growth oil country tubular goods and automotive markets with the addition of Severstal Columbus. Moreover, being located in Mississippi, Severstal Columbus provides geographic diversification and growth opportunities for Steel Dynamics.
Earnings Whispers
Our proven model does not conclusively show that Steel Dynamics is likely to beat the Zacks Consensus Estimate in the third quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: ESP for Steel Dynamics is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 44 cents.
Zacks Rank #2 (Buy): Steel Dynamics’ Zacks Rank #2 when combined with an ESP of 0.00% makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
United States Steel Corp. (X) has earnings ESP of +6.96% and holds a Zacks Rank #2 (Buy).
Allegheny Technologies Inc. (ATI) has earnings ESP of +40.00% and carries a Zacks Rank #3 (Hold).
AK Steel Holding Corp. (AKS) has earnings ESP of +11.11% and sports a Zacks Rank #3 (Hold).
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