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Are US Steel Stocks a ‘Sell’ after Disappointing Q1 Guidance?


Mar. 18 2019, Updated 2:55 p.m. ET

Steel stocks

Today, Steel Dynamics (STLD) released its first-quarter earnings guidance. The company expects its first-quarter EPS to be between $0.88 and $0.92. It posted EPS of $1.17 in the fourth quarter of 2018 and $0.96 in the first quarter of 2018.

Steel Dynamics’ guidance was lower than what the markets had been expecting. While the sequential fall in its earnings was expected, the markets were surprised by the company’s anticipated year-over-year fall in its first-quarter earnings.

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Last week, Nucor (NUE) provided underwhelming guidance. U.S. Steel Corporation (X) also provided much weaker first-quarter earnings guidance during its fourth-quarter earnings release. AK Steel’s (AKS) 2019 guidance was also much lower than expected.

Meanwhile, after a sharp fall last year, US steel and iron ore stocks, including Cleveland-Cliffs (CLF), are still in the green this year. However, lower guidance from two of the leading steel companies (XME) in the span of a few days has made investors apprehensive.


It’s not all doom and gloom for steel companies. Steel Dynamics said during its guidance release, “Recent increases in sheet steel prices are having a positive impact, resulting in increased order activity and reconstituted order backlogs.”

Nucor also sounded positive about the steel industry’s outlook, saying, “We believe that sheet pricing reached the low point during the first quarter and are encouraged by the impact of recent price increases.”

Among other US steel stocks, AK Steel still appears expensive. Read How to Play AK Steel amid High Volatility for more information. In contrast, considering its outlook, U.S. Steel looks to offer more reasonable value. Read U.S. Steel: How Much Upside Do Analysts See? for more analysis.


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