Steel Dynamics (STLD) topped first-quarter earnings and sales estimates after the close on Monday. STLD stock dipped in Monday stock market action and traded slightly lower after the report, despite a bullish outlook, but remains close to a buy point.
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Nucor (NUE) and Cleveland-Cliffs (CLF) stocks also are near buy points ahead of their Thursday earnings reports.
Copper miner Freeport-McMoRan (FCX), which is on the IBD 50, rounds out Thursday’s big industrial metals earnings reports.
Global steel giant Arcelor Mittal (MT) is in the IBD Leaderboard portfolio. The hot steel industry group is rated No. 19 among 197 industry groups based on stock performance and momentum. STLD stock is ranked No. 3 within the steel group based on its 96 IBD Composite Rating.
Steel Dynamics Earnings
Estimates: Analysts expect EPS to soar 125% to $1.98 as revenue climbs 27% to $3.28 billion, according to Zacks Investment Research.
Results: EPS vaulted 131% to $2.03, while revenue grew 38% to $3.54 billion. EPS would have been 7 cents higher if not for $20 million in construction cost of the company’s new Sinton, Texas, flat roll steel mill.
Outlook: “We remain confident that market conditions are in place to benefit the domestic steel industry in 2021 and beyond,” CEO Mark Millett. Second-quarter earnings “will be even higher than our record first quarter 2021 results,” he said.
Still, analysts already expected Q2 profit to top Q1 results. Zacks’ consensus (of 2 analysts) is for Q2 EPS of $2.38.
Milled said that “strong steel demand coupled with extremely low customer steel inventory throughout the supply chain” are supporting steel prices.
Earnings in the second half of 2021 could get a lift from the new $1.9-billion Texas steel mill. Production should begin in late summer, Steel Dynamics said, adding that some customers have agreed to co-locate on the site.
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STLD Stock
Shares gave up 0.9% to 50.75 after the close. That followed regular Monday stock market action, which saw STLD stock slip 0.6% to 51.19, despite making a run at a 52.69 buy point early in the session. The buy point is 10 cents above STLD stock’s high as it etched out a 4-weeks tight pattern beginning the week of March 26.
That’s an extra week to a more traditional, yet still fairly uncommon, 3-weeks-tight pattern. That can offer an entry point, or a chance to add shares, after a leading stock has broken above a proper buy point, then pauses while holding fast to its gains.
STLD stock’s breakout came in early March from a 42.20 buy point in a cup base, according to a MarketSmith analysis displayed on a weekly chart. Over the past three weeks, STLD stock’s biggest weekly move was 1.3%, within the 1.5% change that qualifies as “tight.”
IBD generally suggests that investors who establish a position on the original breakout only add a fraction of the original position on a breakout from a 3-weeks-tight pattern.
IBD also has introduced an options strategy for investors seeking to capitalize on the upside potential of a stock’s move around earnings, while reducing the risk of a negative reaction to an earnings report.
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