What to Expect From Steel Dynamics (STLD) and United States Steel's (X) Post-Market Earnings

NEW YORK (TheStreet) -- Metalwork heavyweights Steel Dynamics (STLD) and United States Steel Corporation (X) are due to report fourth-quarter and full-year earnings after the bell Monday.

Fort Wayne, Ind.-based Steel Dynamics previously issued fourth-quarter earnings guidance of 21 cents to 25 cents a share. At the top end of the range, this comes in 7.4% lower than a year earlier thanks to favorable tax adjustments in 2012.

"The benefit of improved flat roll pricing during the fourth quarter is expected to be offset by seasonally reduced overall steel shipments and decreased long product metal spreads affected by decreased product pricing combined with increased scrap costs during the quarter," the company said in a statement.

Sales in the residential construction market are expected to be lower than expected but higher than previous years, while the nonresidential construction market is growing more favorable. Meanwhile, the domestic automotive and manufacturing markets remain strong, and its metals recycling branch is expected to show improvement.

Analysts surveyed by Thomson Reuters expect fourth-quarter net income of 24 cents a share and revenue of $1.86 billion. For fiscal 2013, analysts have consensus of 83 cents a share in net income and revenue of $7.37 billion.

Meanwhile, Pittsburgh-based United States Steel is expected to post a fourth-quarter net loss of 25 cents a share on $4.36 billion in revenue. For the full year, analysts anticipate a net loss of $1.22 a share on $17.5 billion in revenue.

By mid-afternoon, Steel Dynamics shares had taken off 2.5% to $16.54, while United States Steel slipped 1.7% to $24.86.

TheStreet Ratings team rates STEEL DYNAMICS INC as a Buy with a ratings score of B+. The team has this to say about their recommendation:

"We rate STEEL DYNAMICS INC (STLD) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, good cash flow from operations, notable return on equity and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • STLD's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 12.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 347.9% when compared to the same quarter one year prior, rising from $12.83 million to $57.49 million.
  • Net operating cash flow has significantly increased by 56.14% to $183.27 million when compared to the same quarter last year. In addition, STEEL DYNAMICS INC has also vastly surpassed the industry average cash flow growth rate of -4.59%.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, STEEL DYNAMICS INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • STEEL DYNAMICS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, STEEL DYNAMICS INC reported lower earnings of $0.73 versus $1.22 in the prior year. This year, the market expects an improvement in earnings ($0.83 versus $0.73).

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