Steel Dynamics Boosts Outlook, U.S. Steel On Track After Nucor Warning

steel dynamics (STLD) said Thursday that third-quarter earnings were above analysts’ estimates. This followed the advice of Nucor (NUE), which warned on Wednesday that earnings would fall below estimates.

American steel (X), which also updated trading trends on Thursday, said earnings were slightly below analysts’ expectations amid “accelerating market headwinds” during the third quarter.

arconic (ARNC), which manufactures aluminum products for the aerospace, automotive and industrial markets, cut its forecast on Wednesday evening due to production problems in the United States and a drop in demand and high energy costs in Europe.

STLD stock was up 1.25% in Thursday morning trading action, following a 9% jump on Wednesday. Nucor slid another 2.5%, after falling 11.3% a day earlier. US Steel slid 0.4% after Wednesday’s 8.6% drop. ARNC stock fell 14.25%.

Steel dynamics increase production

Like Nucor, Steel Dynamics pointed to falling steel prices. The big difference is that Steel Dynamics said its production was up from second-quarter levels, while Nucor’s shipments would fall even more than expected.

“Lower average flat-rolled steel prices should more than offset lower raw material costs and higher shipments,” Steel Dynamics said in a statement.

A day earlier, Nucor attributed weaker-than-expected earnings to “metals margin contraction and reduced shipment volumes, particularly at our sheet and plate mills.”

The short-term hot-rolled coil futures contract returned to around $800 from around $915 when Nucor announced its second-quarter results on July 21. This likely contributed to lower profit margins.

Nucor may be feeling the effects of increased supply from the steel industry, which was one of the reasons for caution heading into 2022. This could explain why shipment volumes are apparently lower than expected. Nucor made no mention of stopping production.

Meanwhile, Steel Dynamics has increased production at its new plant in Sinton, Texas.

American Steel Idle Capability

Imports also appear to be adding to the excess supply. In its update, US Steel said it shut down a blast furnace and tin line at its Gary Works complex, citing market conditions and high imports.

US Steel also brought forward a 30-day maintenance shutdown of a Mon Valley blast furnace and a 60-day shutdown of a European blast furnace.

“We quickly adjusted our integrated operating footprint in steel to better match our backlog and expect our Tubular segment to deliver another quarter of profit growth,” CEO David Burritt said in a statement.

Revised Steel Earnings Outlook

Steel Dynamics said it expects third-quarter EPS of $5.33 to $5.37, excluding start-up costs of 40 cents for its Sinton plant. Analysts were expecting $5.03.

US Steel said it was on track to earn $1.90 to $1.95 per share in the third quarter against expectations of $2.09, according to FactSet.

Nucor now expects earnings of $6.30 to $6.40 per share, well below analysts’ estimates of $7.56 per share polled by FactSet.

In its second-quarter earnings statement, Nucor said it expected results to decline sequentially in the third quarter after record quarterly earnings of $9.67 per share. The company was already anticipating lower expected shipping volumes and prices, but may have been surprised at the extent of the weakness.

Steel Dynamics said, “Broad underlying steel demand and corresponding order activity remains intact across the automotive, construction, industrial and energy sectors.”

The company said profits from its steelmaking business are expected to top record second-quarter results, based on continued strong volume and expanding margins.

Nucor said its steel products segment is expected to have “another strong quarter,” with earnings roughly in line with the second quarter of 2022.

Earnings from the materials segment are also expected to be similar to the second quarter of 2022. And Nucor said it was still on track for its most profitable year ever. This suggests things may be stabilizing at a lower level, rather than snowballing.

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