Steel Dynamics (NASDAQ: STLD) is
the fifth largest producer of carbon steel products in the United States. The firm operates five mid-western electric-furnace mini-mills, producing merchant bars, engineered bar products, wide-flange beams, rails, and flat-rolled steels. It also runs six fabrication facilities, making joists, girders, and decking for non-residential construction projects. Steel scrap is processed at 42 locations in the eastern U.S. and Canada. Nucor (NYSE: NUE) and U. S. Steel (NYSE: X) are major competitors.
The company raised its first quarter and fiscal year outlooks last week, citing higher than anticipated flat rolled steel pricing and improved scrap processing. Management predicted Q1 EPS of $1.25-$1.30, versus Street consensus of $1.18. It also expected FY08 EPS of $5.25-$5.75, versus consensus of $5.35.
The stock
popped into a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with three "strong buys", two "buys" and six "holds". The STLD Sales Growth rate (72.78%), Return on Assets (11.66%), Return on Investment (14.47%) and Return on Equity (28.59%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 71% of the outstanding shares. Over the past 52 weeks, the stock has traded between $33.62 and $69.60. A stop-loss of $57.00 looks good here. Note that the firm will conduct a 2-for-1 stock split at the end of the month, trading split-adjusted on March 31st. Note, too, that management is expected to announce Q1 results in mid-April.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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