Steel Dynamics Inc. (STLD) has projected fourth-quarter 2014 adjusted earnings in the band of 38 cents to 42 cents per share, the midpoint of which reflects a 67% year over year and a 4% sequential growth. However, including the impact of pre-tax estimated charges of post-acquisition purchase adjustments ($12 million) and market-adjustment costs due to ferrous raw material pricing declines ($6 million), the earnings guidance stands at 33–37 cents per share.
Steel Dynamics is presently undergoing assessment related to the asset valuation of its Minnesota operations. So, the impact of impairment charges has been excluded from the fourth-quarter earnings guidance.
The earnings guidance also excludes the impact of the company’s recent acquisition of Severstal Columbus. The company anticipates shipments and metal spread to shrink in the fourth quarter of 2014. The average quarterly price of products of the company is expected to decline and outpace lower scrap costs, therby pinching profits.
However, Steel Dynamics expects profits from its steel operations similar to the third quarter. Profits from its fabrication operations are expected to be strong despite falling shipments due to higher product pricing.
The automotive and manufacturing business continues to be strong and improving construction markets will drive demand for steel. Although the company is prone to volatility in the energy markets, it anticipates steel consumption in 2015 to remain strong. End-market demand dynamics is also expected to remain intact in 2015. Further, Steel Dynamics is optimistic regarding recovery in the residential and nonresidential construction sectors.
Due to the continuous fall in ferrous and nonferrous metal product pricing, Steel Dynamics expects the metal recycling operations to deliver minimal loss for the fourth quarter. The operations had reported an operating income of $13 million in the third quarter. The company expects shipments and ferrous metal margins to decrease by approximately 10% sequentially.
Additionally, the board of directors of Steel Dynamics has announced a quarterly cash dividend of 11.5 cents per common share payable on or about Jan 12, 2015 to shareholders of record on Dec 31, 2014.
Steel Dynamics currently has a Zacks Rank #3 (Hold).
Some better-ranked companies worth considering in the steel producer industry are Kobe Steel Ltd. (KBSTY), Mechel OAO (MTL) and United States Steel Corp. (X). While Kobe Steel carries a Zacks Rank #1 (Strong Buy), Mechel and United States Steel bear a Zacks Rank #2 (Buy).
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