Steel Dynamics (STLD – Research Report), the Basic Materials sector company, was revisited by a Wall Street analyst yesterday. Analyst Lawson Winder from Bank of America Securities maintained a Hold rating on the stock and has a $165.00 price target.
Lawson Winder has given his Hold rating due to a combination of factors including Steel Dynamics’ (STLD) Q1’24 earnings per share (EPS) surpassing mid-March guidance and consensus estimates, offset by concerns over near-term U.S. hot-rolled coil (HRC) pricing stability and the company’s valuation appearing rich compared to historical averages. The company’s segment results essentially met expectations, with positive aspects such as lower taxes and higher other income contributing to the EPS. However, despite strong order backlogs extending through Q3’24 and anticipated benefits from higher volumes and potential stabilization in the Fabrication segment, the rating remains Neutral.
The firm’s outlook is buttressed by solid order activity across all business segments and expectations of increased demand fueled by federal funding and the onshoring of manufacturing. Nevertheless, the cautious stance in the rating reflects concerns over a stalling HRC pricing mini-rally, an anticipated increase in supply, and Steel Dynamics trading at a multiple that is significantly higher than its historical average. Moreover, while free cash flow was better than anticipated and a substantial portion of net income was returned to shareholders through buybacks and dividends, these factors were not enough to warrant an upgrade from a Hold rating.
Based on the recent corporate insider activity of 118 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of STLD in relation to earlier this year.
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Steel Dynamics (STLD) Company Description:
Steel Dynamics, Inc. engages in the manufacture of steel products and metal recycling. It operates through the following segments: Steel Operations, Metals Recycling Operations, Steel Fabrication Operations, and Other. The Steel Operations segment consists of sheet products including hot roll, cold roll, and coated steel; long products including structural steel beams, pilings, and standard and premium grade rail; and steel finishing services such as turning, polishing, straightening, chamfering, threading, and precision saw-cutting. The Metals Recycling Operations segment provides an array of both ferrous and non-ferrous scrap recycling, scrap management, transportation, and brokerage products and services. The Steel Fabrication Operations segment offers steel joists, girders, and steel deck, including specialty deck. The Other segment comprises of subsidiary operations and certain unallocated corporate accounts. The company was founded by Keith E. Busse, Mark D. Millett, Richard P. Teets and John C. Bates in August 1993 and is headquartered in Fort Wayne, IN.
