Steel Dynamics: Bullish with a Share Repurchase Program

| About: Steel Dynamics, (STLD)

Steel Dynamics, Inc. (NASDAQ:STLD) posted record second-quarter earnings of $1.05 per share in late July, citing strong shipments and higher selling values as catalysts. The earnings result more than doubled last year’s 51 cents and exceeded the consensus estimate by 13%. The company also upped its full-year earnings guidance as did Wall Street.

Company Description

Steel Dynamics is the fifth largest producer of carbon steel products in the nation. The company operates five electric-furnace mini-mills and employs about 3,500 individuals.

Share Repurchase

On July 29, the company announced that it approved a 5-million-share increase to its existing share repurchase program. The boost gives STLD authority to repurchase up to an additional 8.9 million shares. Steel Dynamics said it has repurchased 46 million shares of its common stock since September 2004.

"We believe that this expansion of our share repurchase program speaks to both management's and our board of directors' belief that, from time to time, as and when market conditions undervalue our stock, one of the better decisions that we can make to both demonstrate our confidence in the future and to build shareholder value is to invest in our own shares," said Keith Busse, Steel Dynamics Chairman and Chief Executive Officer. He added that he believes Steel Dynamics should be able to pursue the expanded share repurchase program without sacrifice to any of its facility expansion, capital expenditure or growth plans.

Second Quarter’s Record Results

On July 21, the company posted record results for the second quarter. Earnings per share of $1.05 more than doubled last year’s 51 cents and topped the consensus estimate by 13%.

Second-quarter net sales jumped by an impressive 164% to $2.4 billion from the year-prior $911 million.

Bullish on the Future

Steel Dynamics also upped its full-year earnings guidance as did Wall Street. The company now expects full-year 2008 earnings per share to range between $3.80 and $3.90.

Eight out of 9 covering analysts lifted full-year forecasts of $3.50 per share to $3.84.

Value Fundamentals

STLD is trading at 6.4x its forward earnings. Its price-to-book (P/B) is 2.4. The company offers a return on equity [ROE] of 36%, versus the industry average of 25%. Additionally, STLD pays a dividend that is currently yielding 1.6%, ahead of its industry.

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