Can Steel Dynamics Beat Earnings Estimates in 2Q16?



Earnings estimates

According to the consensus estimates compiled by Bloomberg, Steel Dynamics (STLD) is expected to post an adjusted EBITDA[1. earnings before interest, tax, depreciation, and amortization] of $328 million in 2Q16.

The company had posted an adjusted EBITDA of $214 million in 1Q16 and $180 million in 2Q15. The increase in Steel Dynamics’s earnings is expected to be led by higher steel prices as well as a higher capacity utilization rate.

Earnings of other steel producers, including AK Steel (AKS) and U.S. Steel Corporation (X), are also expected to increase sequentially in 2Q16 on the back of higher flat rolled steel prices.

Article continues below advertisement

Company guidance

Steel Dynamics has not provided EBITDA guidance for 2Q16, but the company expects to post an adjusted EPS (or earnings per share) between $0.53–$0.57. Wall Street analysts expect Steel Dynamics to post an adjusted EPS of ~$0.56 in 2Q16, which is toward the upper end of the company’s guidance.

Steel Dynamics could end up posting better-than-expected EPS in the quarter. Current analysts’ estimates might not be fully factoring the big spike in flat steel prices. Furthermore, Steel Dynamics’s earnings could rise further in the next quarter as the lag impact from contract pricing, as well as higher spot prices, starts to set in. This is assuming that spot steel prices don’t fall in a big way from these levels.

The next major steel company (MXI) to release its 2Q16 earnings would be Nucor (NUE). In the next part of this series, we’ll explore what analysts expect from Nucor’s 2Q16 earnings.


More From Market Realist