Stocks on the Run – Steel Dynamics, Inc. (NASDAQ:STLD),

On Wednesday, Shares of Steel Dynamics, Inc. (NASDAQ:STLD), gained 0.09% to $32.70. During the day, the lowest price at which share is traded was $3.36 and hit the highest price at $2.84. The stock’s institutional ownership stands at 1.57%.

Steel Dynamics, Inc. (NASDAQ/GS: STLD) recently declared first quarter 2017 financial results.  The company stated first quarter 2017 net income of $201.0M, or $0.82 per diluted share, with net sales of $2.40B.  Comparatively, prior year first quarter net income was $63 million, or $0.26 per diluted share, with net sales of $1.7 billion.  Sequential fourth quarter 2016 net income was $20 million, or $0.08 per diluted share, which included non-cash goodwill and asset impairment charges of $0.31 per diluted share and debt refinancing and repayment charges of $0.04 per diluted share.  Apart from these items, the company’s adjusted fourth quarter 2016 net income was $106 million, or $0.43 per diluted share.

“The team performed well and delivered a strong first quarter performance with all of our operating platforms improving profitability,” said Mark D. Millett, President and Chief Executive Officer. “Our first quarter 2017 income from operations rose over 75 percent sequentially to $335.0M with adjusted EBITDA of $421.0M.  The boost in our earnings was principally driven by our flat roll operations, as demand was strong and customer inventory levels continued to be positioned at historically low levels.  We also practiced raised shipments from our long product steel divisions.  Steel demand from the automotive sector remained steady and construction continued to improve.  In Addition To, specific to our Engineered Bar Products Division, there was an overall general demand improvement, supported by positive movement in the heavy equipment and energy sectors.

“Operating income from our metals recycling platform more than doubled in the first quarter 2017, as domestic steel mill utilization raised, strengthening both ferrous scrap shipments and metal spread,” continued Millett. “Moreover, in what is typically a seasonally lower demand timeframe for our fabrication operations, the team achieved record quarterly shipments and improved earnings, a strong indicator that the non-residential construction market is continuing a positive growth profile.”

The company generated strong cash flow from operations of $240.0M during the first quarter 2017. As evidence of the confidence in the company’s sustainable long-term cash flow generation capability, the board of directors approved an 11 percent increase in the company’s first quarter 2017 cash dividend, reflecting the strength of the company’s capital structure and liquidity profile, and the continued optimism and confidence in its future prospects.

Additional First Quarter 2017 Comments:

First quarter 2017 operating income for the company’s steel operations raised 62% to $352.0M sequentially, based on a 12% increase in shipments and metal spread expansion.  The company’s average steel product price raised more than consumed raw material scrap costs, resulting in steel metal spread expansion.  The first quarter 2017 average product selling price for the company’s steel operations raised $63 to $743 per ton.  The average ferrous scrap cost per ton melted raised $44 to $264 per ton.

First quarter 2017 operating income attributable to the company’s flat roll products raised 67% when contrast to the sequential fourth quarter, driven by an 11% increase in shipments combined with metal spread expansion. Operating income from long products raised 39% as a result of a 16% improvement in shipments, mainly from the company’s Engineered Bar Products and Structural and Rail divisions.  Long product steel selling values remain under pressure from excess domestic production capability, coupled with elevated import levels.  The company’s steel production utilization rate was 95 percent in the first quarter 2017, contrast to 81 percent in the sequential fourth quarter and contrast to the domestic industry utilization rate of 75 percent.

First quarter 2017 operating income from the metals recycling operations was $21.0M, contrast to $10.0M in the sequential fourth quarter (apart from a non-cash goodwill impairment charge of $5.50M).  Both ferrous scrap demand and pricing raised as domestic steel mill utilization improved.

The company’s fabrication operations recorded first quarter 2017 operating income of $24.0M, contrast to sequential fourth quarter results of $18.0M.  Despite what is typically a lower demand season, the platform achieved record quarterly shipments, which more than offset moderate margin compression as product pricing declined slightly more than steel input costs.

Outlook:

“The company believes that current and anticipated macroeconomic and market conditions are in place to benefit the domestic steel industry in the coming year,” said Millett.  “Although domestic automotive production may be coming off record levels, we believe 2017 North American automotive steel consumption will be steady, and that there will be additional growth in the construction sector, especially for larger, public sector infrastructure projects.  Moreover, the energy sector has begun to strengthen.

“We continue to see progress at our Columbus Flat Roll Division.  The unbeaten market and product diversification achieved at Columbus will continue to benefit the coming years as we have accessed various new customers and end markets. The Columbus team accomplished construction of a $100.0M paint line in the fourth quarter 2016, adding 250,000 tons of value-added painting capability. Start-up is going well, with painted shipments of just under 13,000 tons in the first quarter.

“We continue to strengthen our financial position through strong cash flow generation and the execution of our long-term strategy. We are well-positioned for growth, and remain focused on delivering shareholder value through organic and planned growth opportunities,” concluded Millett.

Technical Analysis:

STLD has market value of $7.91 billion while its EPS was booked as $1.57 in the last 12 months. The stock has 243.79 million shares outstanding. In the profitability analysis, the company has gross profit margin of 17.20% while net profit margin was 4.90%. Beta value of the company was 1.48; beta is used to measure riskiness of the security.

Analyst recommendation for this stock stands at 2.10.

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