Steel Dynamics 4Q earnings
In the previous parts of this series, we discussed the 4Q earnings of AK Steel (AKS), Nucor (NUE), and US Steel (X). These companies are part of the SPDR S&P Metals and Mining ETF (XME). Let’s now analyze what you should expect from Steel Dynamics’ 4Q earnings. Steel Dynamics (STLD) is expected to release its earnings on January 28.
The 3Q earnings of Steel Dynamics were better than Wall Street expectations. The company reported net income of $91 million in 3Q. This translates into earnings per diluted share (or EPS) of $0.38.
Steel Dynamics has given a 4Q earnings per share (or EPS) guidance of $0.33–$0.37. It posted EPS of $0.24 in 4Q 2013. Steel Dynamics has three major operations, as you can see above. The company expects the profitability of its steel operations to be similar to its 3Q results—excluding the earnings of Columbus operations, which it acquired last year from Severstal.
Steel Dynamics is expected to witness a minimal loss in its scrap processing facility. As we’ve discussed, lower scrap prices will have a negative impact on scrap processing operations.
Steel Dynamics also has iron ore mining operations in Minnesota. Iron ore prices corrected by almost 50% last year. STLD is evaluating the fair value of its mining assets. This could have a negative impact on its 4Q earnings. U.S. Steel has also written down the value of several of its businesses, leading to higher restructuring costs for U.S. Steel in previous quarters.
The outlook for STLD looks stable. It has minimal exposure to energy companies. Steel Dynamics only had a 3% exposure to the energy industry prior to the Columbus acquisition. However, its exposure has gone up. The 4Q commentary from STLD could offer more insights on this topic.
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