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Key for Investors: Analyzing Steel Dynamics 2Q15 Earnings

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Part 3
Key for Investors: Analyzing Steel Dynamics 2Q15 Earnings PART 3 OF 7

Steel Dynamics’ Q2 Earnings: Higher Shipments Offset Lower Prices

Steel Dynamics’ 2Q15 earnings

Steel Dynamics’ (STLD) 2Q15 earnings were released on July 20. They were greeted well on Wall Street. The company reported strong shipments. The shipments partially offset lower steel prices. Please be aware that steel prices in the US have been under severe pressure over the last six months.

Global overcapacity and a worse-than-expected slowdown in Chinese steel demand created a glut of steel in the international markets. Globally, steel companies—including those operating in the US—have been reeling under the impact of Chinese steel imports. Higher levels of steel imports have dented Steel Dynamics’ 2Q15 earnings. We’ll discuss this more throughout the series.

Steel Dynamics’ Q2 Earnings: Higher Shipments Offset Lower Prices

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Flat revenue

The above chart shows the key financials from Steel Dynamics’ 2Q15 earnings report. As you can see, its revenue was almost flat—compared to the previous quarter. However, shipments rose 15%—compared to 1Q15. The revenue was negatively impacted by lower steel prices. It fell $100 per ton—compared to the previous quarter.

Earnings are lower than last year

Steel Dynamics’ unit production costs also fell as steel scrap prices corrected during the quarter. Steel Dynamics’ average scrap cost fell by $57 per ton in 2Q15—compared to the previous quarter.

However, the fall in steel prices was much more severe. Steel Dynamics’ EPS (earnings per share) more than halved—compared to 2Q14.

Lower steel prices would negatively impact the Q215 earnings of other steel companies including ArcelorMittal (MT), Nucor (NUE), and AK Steel (AKS). Currently, AK Steel forms 2.70% of the SPDR S&P Metals and Mining ETF (XME).

In the next part of this series, we’ll discuss Steel Dynamics 2Q15 earnings in more detail.

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