Steel Dynamics (NasdaqGS:STLD) Q3 Earnings: What Can You Expect?

in EARNINGS/INVESTING IDEAS by

Steel Dynamics, Inc. (NasdaqGS:STLD) is scheduled to report Q3 earnings results after markets close for trading on October 19, 2020.

The company is expected to report earnings of $0.48/share on revenue of $2.211 billion. The consensus earnings per share (EPS) of $0.48/share is based on a poll of 6 analysts and represents a decline in eps of −30.2% over the same quarter last year when the company reported earnings of $0.69/share.

The revenue forecast of $2.211 billion based on a poll of 6 analysts implies a year-over-year (YoY) decline in revenue of −12.5%. Last year the company reported $2.527 billion in revenue for the quarter.

Expected to report EPS contraction of −30.2% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $2,211.47 $2,526.84 −12.5%
EPS $0.48 $0.69 −30.2%

Earnings Call Trends

Historically, management has exceeded analyst expectations 5 out of the last 8 tracked quarters, and missed expectations 3 quarters.

What are your expectations from Steel Dynamics, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.43 $0.47 10.3% Beat
Q1, 2020 $0.84 $0.88 4.2% Beat
Q4, 2019 $0.56 $0.62 10.1% Beat
Q3, 2019 $0.69 $0.69 −0.2% Missed
Q2, 2019 $0.89 $0.87 −2.1% Missed
Q1, 2019 $0.91 $0.91 −0.5% Missed
Q4, 2018 $1.21 $1.31 8.5% Beat
Q3, 2018 $1.66 $1.69 1.9% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price did not react much to the update.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 20, 2020 $26.81 $27.05 0.9% Increase
April 20, 2020 $23.47 $22.22 −5.3% Decline
January 22, 2020 $31.92 $31.63 −0.9% Decline
October 16, 2019 $30.08 $28.71 −4.6% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.14, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.14 implies a 0.1% chance of earnings manipulation.

Fundamentals And Technical Analysis

Steel Dynamics, Inc. is currently trading at $34.06/share, up 2.0% for the day. The company is trading at approximately 95.5% of its 52-week high of $35.78/share. The company’s stock price is up 25.9% since the last earnings report and up 2.6% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 63.72 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:STLD Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 13.12 and a forward P/E multiple of 14.69.

Steel Dynamics, Inc.’s current share price also implies a price-to-book (P/B) multiple of 1.69. The following table summarizes some other key fundamental ratios:

Data as of October 19, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $34.06
P/E Ratio 13.1x
P/E Ratio (Fwd) 14.7x
PEG Ratio −0.3
Total Debt / Total Capital 28.3%
Levered Free Cash Flow $710.9 million
EV / EBITDA 7.1x

Finbox

Steel Dynamics, Inc. is a mid-cap stock with a market capitalization of $7.024 billion and a total enterprise value of $8.237 billion. The company operates in the Materials sector and the Metals & Mining industry.

Steel Dynamics, Inc., together with its subsidiaries, operates as a steel producer and metal recycler in the United States. It operates through three segments: Steel Operations, Metals Recycling Operations, and Steel Fabrication Operations. The Steel Operations segment offers hot roll, cold roll, and coated steel products; structural steel beams, pilings, and standard and premium grade rail products; engineered special-bar-quality products; and merchant-bar-quality products, including rounds, angles, flats, reinforcing bars, and channels and specialty steel sections. This segment is also involved in the turning, polishing, straightening, chamfering, threading, precision saw-cutting, cold drawing, and heat treating of bar products; and cutting to length, straightening, hole punching, shot blasting, welding, and coating of beams, channels, and specialty steel sections. Its products are used in construction, automotive, manufacturing, transportation, heavy and agriculture equipment, and pipe and tube industry sectors. This segment sells its products directly to end-users, steel fabricators, and service centers. The Metals Recycling Operations segment engages in the purchase, process, and resale of ferrous and nonferrous scrap metals into reusable forms and grades. Its ferrous products include heavy melting steel, busheling, bundled scrap, shredded scrap, steel turnings, and cast iron products; and nonferrous products comprise aluminum, brass, copper, stainless steel, and other nonferrous metals. This segment also provides transportation logistics, marketing, brokerage, and scrap management services. The Steel Fabrication Operations segment produces steel building components comprising steel joists, girders, trusses, and steel deck products for non-residential steel fabricators. The company also exports its products. Steel Dynamics, Inc. was founded in 1993 and is headquartered in Fort Wayne, Indiana.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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