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Steel Dynamics Boosts Outlook, U.S. Steel On Track After Nucor Warning

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Steel Dynamics (STLD) said Thursday that third-quarter earnings are tracking above analyst estimates. That followed guidance from Nucor (NUE), which on Wednesday warned that profit will lag estimates.




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U.S. Steel (X), which also updated business trends on Thursday, said profit is running a bit below analyst expectations amid “market headwinds that accelerated” during Q3.

Arconic (ARNC), which makes aluminum products for aerospace, automotive and industrial markets, cut guidance late Wednesday amid production issues in the U.S. and a hit from both lower demand and high energy costs in Europe.

STLD stock rose 1.1% in Thursday stock market action, following a 9% pounding on Wednesday. Nucor slipped another 2%, after tumbling 11.3% a day earlier. U.S. Steel slipped 1.8% on the heels of Wednesday’s 8.6% dive. ARNC stock plunged 15.5%.

Steel Dynamics Boosts Output

Like Nucor, Steel Dynamics highlighted lower steel pricing. The big difference is that Steel Dynamics said its output is rising from Q2 levels, while Nucor shipments will fall even more than expected.

“Lower average flat rolled steel pricing is expected to more than offset lower raw material costs and higher shipments,” Steel Dynamics said in a statement.

A day earlier, Nucor had attributed softer-than-expected earnings to “metal margin contraction and reduced shipping volumes particularly at our sheet and plate mills.”

The near-term futures contract for hot-rolled coil has pulled back to about $800 from about $915 when Nucor reported second-quarter  earnings on July 21. That likely has contributed to narrower profit margins.

Nucor may be feeling the effects of increased steel industry supply, which was one of the reasons for caution going into 2022. That could explain why shipment volumes are apparently off more than expected. Nucor made no mention of production downtime.

Meanwhile, Steel Dynamics has been ramping output at its new Sinton, Texas, mill.

U.S. Steel Idles Capacity

Imports also appear to be adding to excess supply. In its update, U.S. Steel said that it idled a blast furnace and a tin line at its Gary Works complex, citing market conditions and elevated imports.

U.S. Steel also pulled forward a 30-day maintenance outage of a Mon Valley blast furnace and a 60-day outage of a European blast furnace.

“We have quickly adjusted our integrated steelmaking operating footprint to better match our order book and expect our Tubular segment to deliver another quarter of earnings growth,” CEO David Burritt said in a statement.

Revised Steel Earnings Outlooks

Steel Dynamics said it expects Q3 EPS of $5.33 to $5.37, excluding 40-cent startup costs for its Sinton mill. Analysts were expecting $5.03.

U.S. Steel said it’s on track to earning $1.90-$1.95 cents a share in Q3 vs. expectations of $2.09, according to FactSet.

Nucor now predicts earnings of $6.30 to $6.40 per share, well below estimates of $7.56 a share from analysts polled by FactSet.

In its second-quarter earnings statement, Nucor said it expected results to fall sequentially in the third quarter after a quarterly record profit of $9.67 per share. The company already anticipated lower expected shipment volumes and prices, but may have been surprised at the extent of the weakness.

Steel Dynamics said, “Broad underlying steel demand and corresponding order activity remains intact from the automotive, construction, industrial, and energy sectors.”

The company said profits from its steel fabrication operations should top record second quarter results, based on continued strong volume and expanding margins.

Nucor said its steel products segment is expected to have “another strong quarter,” with earnings roughly in line with the second quarter of 2022.

Raw materials segment earnings also are expected to be similar to the second quarter of 2022. And Nucor said it’s still on track for its most profitable year ever. That suggests things may be stabilizing at a lower level, rather than snowballing.

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Business

Nucor Stock Dives From Near Buy Point On Profit Warning

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Steelmaker Nucor (NUE) warned on profits amid declining volumes at its steel mills, a day after steel stocks rallied to defy a broad market sell-off. Nucor stock plunged from near a buy point with rivals also retreating.




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Nucor management targeted fourth-quarter earnings of $7.65-$7.75 per share. That would mark a record quarter, up from $7.28 in the third quarter and, at the midpoint, a year-over-year gain of more than 490%. But analysts on Wall Street were on average expecting $8.18, according to FactSet.

Earnings in Nucor’s steel mills segment remain robust and should be comparable to Q3 “despite lower volumes caused by year-end seasonality,” Nucor said in a statement.

The new language Wednesday marked a downshift from Oct. 21. Nucor management said then it expects steel mill segment profit to “improve” in Q4 vs. Q3, driven by additional earnings growth at its sheet and plate mills. The steel mill segment generated 67% of total company revenue, and 86% of total profit (before eliminations), in the third quarter.

Nucor continues to expect earnings to increase in its steel products unit, according to Wednesday’s statement. And it continues to forecast that earnings will fall in the raw materials segment vs. Q3 due to margin compression at Nucor’s direct reduced iron facilities.

“Demand continues to be strong in most of the end markets we serve,” Nucor said Wednesday. “We are confident that 2022 will be another year of strong profitability.”

The company did not offer specific Q4 EPS guidance during its most recent earnings report, on Oct. 21.

Nucor Stock, Steel Stocks

Shares of Nucor plunged nearly 12% to 104.65 on the stock market today, tumbling below its 50-day line. Nucor stock rose 2.5% Tuesday to briefly retake a 122.16 cup-with-handle buy point, but closed below the entry.

Among other steel stocks, United States Steel (X) dropped 4.3% on Wednesday, while Cleveland-Cliffs (CLF) dived 7.6% and Steel Dynamics (STLD) lost 6.6%.

Steel stocks went on a tear over the summer. Investors bet on the pandemic headwinds easing and on higher U.S. infrastructure spending under President Joe Biden.

In September, Nucor announced plans for a $100 million expansion of a bar mill, adding 600,000 tons of capacity. Nucor also said it would build a $2.7 billion sheet mill with a capacity of 3 million tons.

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Business

American Airlines, Nucor, Goldman Sachs and more

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Bundles of steel from Nucor Corp. sit for sale to at Thompson Building Materials in Lomita, California, U.S., on Thursday, Aug. 30, 2012.

Patrick Fallon | Bloomberg | Getty Images

Check out the companies making headlines in midday trading.

American Airlines, United Airlines, Delta Air Lines — Shares of American Airlines the major airlines rose over 1% Monday after the White House said it would ease travel restrictions for international travelers who are vaccinated against Covid-19. Shares of Delta and United gained earlier but ticked down nearly 0.2% each.

China Evergrande Group — Shares of the embattled Chinese property giant dropped 10% on the Hong Kong Stock Exchange. The company has been scrambling to pay its suppliers, and warned investors that it could default on its debts. Last week, the company said its property sales will likely continue to drop significantly in September several months of weakness.

Centerpoint Energy, Dominion Energy — Utility stocks rose on Monday as investors shifted toward defensive plays during the broader market slide. Shares of Centerpoint and Dominion rose roughly 1% each.

Nucor, Freeport-McMoRan, Ford, Caterpillar — Stocks linked to global growth declined Monday. Steel stock Nucor declined 8.4%, miner Freeport-McMoRan fell 6.6%, auto maker Ford dropped 6% and construction equipment manufacturer Caterpillar retreated 4.8%.

APA, Devon Energy — Energy stocks tumbled amid a drop in oil pries on concerns about the global economy. The S&P 500 energy sector fell 3.3%, becoming the worst-performing group among the 11 groups during Monday’s market sell-off. APA and Devon Energy both shed more than 6%. Occidental Petroleum dropped 6% and Hess slid over 5%.

Goldman Sachs, Bank of America, JPMorgan Chase — Financials stocks declined as the U.S. 10-year Treasury yield dropped, with falling rates typically crimping bank profits. Goldman Sachs, Bank of America and Citigroup all shed more than 4%. JPMorgan Chase and Morgan Stanley both declined more than 3%.

ARK Innovation, Coinbase, Tesla, Zoom, Square — Shares of Cathie Wood’s flagship fund dropped more than 4% as innovation names experienced harsh selling. Top holdings Coinbase and Teladoc both lost more than 5%. Unity Software shed over 5%, and Tesla dropped more than 3%. Square and Zoom Video dropped more than 3% each.

Pfizer — The drug maker stock ticked 0.3% higher after the company said its Covid vaccine is safe and appears to generate a robust immune response in kids ages 5 to 11. If the FDA spends as much time reviewing the data for that age group as it did for 12- to 15-year-olds, the shots could be available in time for Halloween.

AstraZeneca — Shares of the United Kingdom-based pharmaceutical company popped more than 4% in midday trading after announcing that its breast cancer drug Enhertu showed positive results in a phase-three trial.

Invesco — Invesco shares declined 9% Monday. The stock ran up on Friday following a Wall Street Journal report that the asset manager is in talks to merge with State Street’s asset management unit. The report, citing people familiar with the matter, said a deal is not imminent and might not happen at all.

— CNBC’s Maggie Fitzgerald, Yun Li and Jesse Pound contributed reporting

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