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Steel Dynamics (STLD) Up 19% in 3 Months: What's Driving It?

Shares of Steel Dynamics, Inc.STLD have popped around 19% over the last three months. The company has also outperformed its industry 's gain of roughly 15% over the same time frame.

Steel Dynamics has a market cap of roughly $11.2 billion and average volume of shares traded in the last three months is around 2,634.3K. The company has expected long-term earnings per share growth of around 12%, higher than the industry average of 6.9%.

Let's take a look into the factors that are driving this Zacks Rank #1 (Strong Buy) stock.

Driving Factors

Forecast-topping earnings performance in the last reported quarter and upbeat outlook have contributed to the rally in Steel Dynamics' shares. Moreover, President Donald Trump's recent proposal of imposing tariffs on imported steel and aluminum has also sparked a rally in stocks of U.S. steel makers including Steel Dynamics.

The President, in a meeting with executives of steel and aluminum companies at the White House, said last Thursday that he would levy 25% tariff on steel imports and 10% tariffs on aluminum imports and plans to formally announce them this week. Steel Dynamics' shares gained around 4% on the announcement.

Steel Dynamics topped earnings and revenue expectations in fourth-quarter 2017. The company logged profit (as reported) of $305 million or $1.28 per share for the quarter, marking a significant increase from $20 million or 8 cents recorded a year ago.

The bottom line in the reported quarter was boosted by a one-time tax benefit of $181 million, resulting from the company's revaluation of its deferred tax assets and liabilities related to the recently enacted U.S. Federal Tax Cuts and Jobs Act of 2017. Adjusted earnings of 54 cents per share for the quarter trounced the Zacks Consensus Estimate of 49 cents.

Net sales for the quarter went up around 22% year over year to $2,336.5 million, also surpassing the Zacks Consensus Estimate of $2,173 million.

Steel Dynamics said that it sees the prevailing and expected macroeconomic and market conditions to benefit domestic steel consumption this year. Demand for steel in the domestic markets remains healthy while demand and pricing have structurally improved globally.

Steel Dynamics believes steel consumption in the automotive market in North America to be steady and the company continues to gain momentum in that space. It also sees sustained additional growth across the construction and energy sectors. The company also noted that it expects the recent tax reform to provide an impetus for additional domestic fixed asset investment and growth.

Steel Dynamics, Inc. Price and Consensus

Steel Dynamics, Inc. Price and Consensus | Steel Dynamics, Inc. Quote

Other Stocks to Consider

Other top-ranked companies in the basic materials space include Olympic Steel, Inc. ZEUS , United States Steel Corporation X and LyondellBasell Industries N.V. LYB , all sporting a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Olympic Steel has an expected long-term earnings growth rate of 7.5%. Its shares have gained 12% over the past six months.

U.S. Steel has an expected long-term earnings growth rate of 8%. Its shares have rallied roughly 62% over the past six months.

LyondellBasell has an expected long-term earnings growth rate of 9%. Its shares have rallied around 19% over the past six months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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