Steel Dynamics, Inc. STLD recorded earnings of $3.70 per share in the first quarter of 2023, down 35.2% from the year-ago quarter’s profit of $5.71.
STLD posted adjusted earnings of $4.01 per share, down 33.4% from the year-ago quarter’s $6.02. It, however, surpassed the Zacks Consensus Estimate of $3.81.
The company’s net sales in the first quarter were $4,893.2 million, which lagged the Zacks Consensus Estimate of $4,930.6 million. Net sales declined 12.2% from $5,569.9 million reported in the prior-year quarter.
Net sales for the company’s steel operations were $3,060.8 million in the first quarter, which reflects a decline of 19% year over year. STLD registered record steel shipments of 3.3 million in the quarter on higher demand. However, it was partially offset by higher metal spread compressions resulting from lower realized selling prices and lagged index contracts in flat-rolled operations. Elevated raw material costs in this segment contributed to higher metal spread compressions in the quarter.
Net sales for the company’s Metal’s recycling operations were $583.4 million in the first quarter, reflecting a rise of 0.7% from the prior-year quarter. Strong demand leading to increased volumes and pricing for both ferrous and non-ferrous materials aided the performance of the unit.
The company’s steel fabrication operations raked in sales of around $868.8 million, down 6.6% year over year. STLD’s steel fabrication operations suffered from seasonal factors resulting in sequentially lower shipments amid steady metal spreads. However, order entry increased, resulting from the strength in non-residential construction markets in the first quarter.
Steel Dynamics ended the first quarter with cash and cash equivalents of $1,604.9 million, down 1.4% from the year-ago levels. Long-term debt was $3,014.4 million, essentially flat year over year.
The company generated $734 million of cash flow from operations in the first quarter. It also repurchased $354 million of its common stock during the quarter.
Steel Dynamics stated that it remains confident that the current market conditions are favorable for strong domestic steel demand. The company is also experiencing strong order activities across all its business units. STLD stated that it expects North American steel consumption to increase in 2023, and rising demand for lower-carbon emission, U.S.-produced steel products and a decrease in import levels to support steel prices.
The company also stated that it anticipates automotive, non-residential construction and energy sectors to remain significant steel consumers this year. STLD’s steel fabrication operations have high order backlogs with strong forward pricing levels. Solid order activity and customer optimism also support demand dynamics for the construction industry.
STLD’s shares are up 13.9% over a year against a 1.5% fall recorded by its industry.
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Zacks Rank & Other Key Picks
Steel Dynamics currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the basic materials space are Olympic Steel, Inc. ZEUS, Ero Copper Corp. ERO and Linde plc LIN. ZEUS sports a Zacks Rank #1, while ERO and LIN carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Olympic Steel’s shares have gained 30.1% in the past year. The Zacks Consensus Estimate for ZEUS’ current-year earnings has been revised 33.1% upward in the past 60 days. It topped the Zacks Consensus Estimate in all the last four quarters. It delivered a trailing four-quarter earnings surprise of 26.2% on average.
ERO Copper’s shares have gained 29.7% in the past year. The Zacks Consensus Estimate for ERO’s current-year earnings has been revised 7.6% upward in the past 60 days. The company has an earnings growth rate of 24.2 for the current year.
Linde’s shares have gained 12.6% in the past year. The company has an expected earnings growth rate of 9.1% for the current year. The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 0.9% upward in the past 60 days.
LIN topped the Zacks Consensus Estimate in all the last four quarters. It delivered a trailing four-quarter earnings surprise of 6% on average.
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