Steel Dynamics Forcasts Third-Quarter Recovery

Mid Cap Watch List and Large Cap Watch List member Steel Dynamics, Inc. (STLD) reiterated its guidance for second quarter earnings in the range of $0.95 to $1.00 per diluted share.

“Shipping volume and pricing of flat-rolled steels thus far in the second quarter have been somewhat weaker than initially expected. Therefore, earnings could end up at the low end of the range due to continued softness in the flat-rolled steel marketplace,” said Keith Busse, Chairman and CEO of Steel Dynamics. “However, while weakness in the flat-rolled steel market has been prolonged due to a slower reduction in steel service center inventories than originally expected, we currently are seeing a slight strengthening and stabilization in pricing. We expect this pricing trend to continue and to improve into the third quarter.”

The earnings figure includes charges related to a debt restructuring, which will reduce EPS by $0.08. Given the pricing power in overall steel products, the issues around flat-rolled steel are disappointing. On the other hand, though, the support from the PPI statistics makes me much more willing to believe management’s third-quarter recovery forecast.