Is Wall Street Getting Jittery about Steel Dynamics?

Steel Dynamics

Among the analysts polled by Thomas Reuters on July 6, three analysts rate Steel Dynamics (STLD) as a “strong buy,” six analysts rate the stock as a “buy” or some equivalent, and five analysts rate it as a “hold.” The stock has received a mean consensus target price of $53.5, which represents 15.3% upside over its closing prices on July 6.

Is Wall Street Getting Jittery about Steel Dynamics?

On June 14, KeyBanc downgraded Steel Dynamics from “overweight” to “sector weight.” The brokerage sees low upside potential for Steel Dynamics following the surge in its valuation. Notably, Steel Dynamics’ valuation is similar to Nucor’s (NUE) valuation. Historically, Steel Dynamics has traded at a premium to Nucor and other US-based steel companies (XME). Towards the end of June, BMO noted that Steel Dynamics is its top pick. The brokerage also listed Alcoa (AA), Glencore, and First Quantum as its top picks in the metals and mining space.

Second-quarter earnings

Steel Dynamics has scheduled its second-quarter earnings for July 23. Analysts polled by Thomson Reuters expect the company to post revenues of $2.89 billion in the quarter. The company posted revenues of $2.60 billion in the first quarter and $2.39 billion in the second quarter of 2017. Analysts expect Steel Dynamics to post an EPS of $1.47 in the second quarter.

Looking at Steel Dynamics’ guidance, the company expects to post an EPS of $1.46–$1.50 in the second quarter. In comparison, the company posted an EPS of $0.96 in the first quarter and $0.63 in the second quarter of 2017. Steel Dynamics second-quarter guidance was better than expected.

Next, we’ll see how analysts rate AK Steel (AKS) in the second quarter.