Will Steel Dynamics Still Be Wall Street’s Favorite Steel Stock?
Steel Dynamics (STLD) will be the first major steel company to report its 1Q17 earnings. The company is expected to release its 1Q17 earnings on April 19. Steel Dynamics’ 4Q16 earnings failed to impress Wall Street. The stock saw negative price action after its 4Q16 earnings release. However, there weren’t any major changes in analysts’ recommendation after the company’s 4Q16 release. In contrast, AK Steel (AKS) saw several downgrades after the company released its 4Q16 financial results, while U.S. Steel Corporation (X) saw upgrades after the company’s 4Q16 performance and 2017 guidance impressed markets.
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Steel Dynamics (STLD) seems to be Wall Street’s favorite steel play (XME). The stock hasn’t received any “sell” recommendations. Of the 14 analysts surveyed by Thomson Reuters, ten analysts rated the stock as a “buy” or some equivalent, while the remaining four analysts rated it as a “hold.” The stock carries a consensus price target of $42.62, which represents 20.9% upside over its closing price on April 7, 2017.
Steel Dynamics could continue to be Wall Street’s most loved steel stock after its 1Q17 earnings. Steel Dynamics’ lower leverage ratios and nimble operations give it a good position in the cyclical steel industry. The company’s industry-leading capacity utilization rate is another added advantage. Steel Dynamics has been making acquisitions to use its excess cash, which should pay off since US steel prices moved to higher levels.
Nucor (NUE) also made a few acquisitions in the downturn. In the next part, we’ll see how analysts rate the stock before its 1Q17 earnings.