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Steel Earnings: Steel Dynamics Beats; Nucor, Cleveland-Cliffs On Tap Amid Peak Steel Price Fears

Steel Dynamics (STLD) reported better-than-expected third-quarter results late Monday, kicking off a big week for steel stock earnings. STLD stock rose early Tuesday.




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Nucor (NUE) earnings are due Thursday afternoon and Cleveland-Cliffs (CLF) reports early Friday. Record profits are expected across the board.

The week started with a downer as Morgan Stanley slashed its price target for STLD, NUE and CLF stocks, as well as U.S. Steel (X).

Analyst Carlos De Alba says he expects investor worries that steel prices have peaked to weigh on steel stocks, working against any near-term rally. De Alba downgraded STLD stock to equal weight from overweight, cutting his price target to 61 from 77. NUE stock’s price target went to 105 from 115 and CLF’s target to 21 from 26.

Meanwhile, Morgan Stanley cut U.S. Steel to underweight from overweight and axed its X stock price target to 17 from 35. On top of peak price worries, De Alba noted U.S. Steel’s big spending plans. U.S. Steel earnings will follow on Oct. 29.

So is Morgan Stanley too bearish? This week’s earnings reports will help Wall Street gauge how long the good times can last.

Steel Dynamics Earnings

Steel Dynamics earnings were seen exploding to $4.95 from 51 cents a year ago, according to Zacks Investment Research. Revenue was seen more than doubling to $4.99 billion.

Steel Dynamics earnings came in $4.96 a share, just beating views. However, another consensus forecast had EPS at $4.57, which STLD comfortably beat. Revenue leapt 118.5% to $5.09 billion.

“We continue to see strong steel demand coupled with moderating, but still historically low customer inventories throughout the supply chain,” CEO Mark Millett said in a statement. “We believe this momentum will continue and that our fourth quarter consolidated earnings could represent another record performance.”

STLD stock rose 1.8% early Tuesday.

NUE, CLF Earnings Estimates

Nucor is expected to earn $7.21 per share, up more than 900% from 63 cents a year ago, as revenue doubles to $10.10 billion.

Cleveland-Cliffs earnings per share also should be off the charts, though that’s partly because year-ago results didn’t account for the its purchase of ArcelorMittal‘s (MT) USA operations. That deal closed in December. CLF earnings are expected to rise to $2.22 per share vs. 4 cents a year ago. Revenue is seen up 240% to $5.65 billion.

Steel Stocks: STLD, NUE, CLF, X

Despite the bearish Morgan Stanley call, steel stocks rallied off their lows on Monday. STLD stock rose 0.9% to 62.42, after trading as low as 59.30. After hours, STLD stock rose 1.7% to 63.50.

During the regular session, Nucor climbed 0.7% and CLF stock dipped 0.4%. X stock, though well off its lows, still lost 1.2%.

From a broader perspective, the four steel stocks have all lost momentum after big runs over the past year. But they’re trying to move higher again.

On a positive note, Steel Dynamics, Cleveland-Cliffs and Nucor stock closed above their 21-day moving averages and arguably are breaking trend lines. But they’re all below their 50-day moving averages.

A move by STLD, NUE and CLF above their 50-day lines, however, could offer an early entry.

X stock, meanwhile, is not only below its 50-day line but its 21-day and 200-day lines as well.

In premarket action, NUE stock, Cleveland-Cliffs and U.S. Steel rose roughly 1% following Steel Dynamics earnings.

Be sure to read IBD’s The Big Picture column each day to stay on top of the prevailing market trend and be sure that growth stock investors still have a green light to buy quality stocks in buy range.

Steel Outlook

Rising supply will be a concern to watch. Steel Dynamics is nearing completion of its Sinton, Texas, flat roll steel mill, with production on track to start before year-end. The company expects the mill to ship up to 2.2 million tons next year.

On a longer timeline, Nucor announced in September plans for a $100-million expansion of a bar mill, adding 600,000 tons of capacity. Nucor also said it will build a $2.7-billion sheet mill with a capacity of 3 million tons. Meanwhile, U.S. Steel is looking to build a $3 billion, 3-million-ton mini mill.

However, there are plenty of positives in the demand outlook, including the bipartisan infrastructure bill with about $550 billion in additional spending planned. In Nucor’s July 22, Q2 earnings call, CEO Leon Topalian said the infrastructure bill should boost steel demand “by as much as 5 million tons per year for every $100 billion of new investment.”

Other strengths include lean stocks throughout the supply chain, with automakers needing to rebuild “staggeringly low” inventories, he said.

The lift in oil prices also could boost demand in the oil sector that’s been a drag throughout the pandemic.

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