Will This Upgrade Help Steel Dynamics (STLD) Stock Today?

Story updated at 10 a.m. to reflect market activity.

NEW YORK (TheStreet) -- Steel Dynamics STLD was upgraded to "buy" from "hold" by Keyblanc Monday.

Steel Dynamics gained 2.1% to $21.36 in morning trading.

The analyst first set a $28 price target for the company. Steel Dynamics' recent acquisition of Sverstal's Columbus facility should boost growth according to Keyblanc analyst Tyler Kenyon.

Kenyon wrote, "Despite the recent rally in the shares following the Company's announced acquisition of Severstal's Columbus, Miss. facility (we see deal closing in mid-September), we believe investors are under-appreciating: 1) likelihood of upside surprises from the acquisition (we see 2015 EPS accretion nearer $0.45/share and longer-term accretion nearer $0.60 vs. the Company's guidance of roughly $0.30-$0.35/share); 2) improving sheet metal spreads via positive industry trends; 3) operational progress at Mesabi Nugget; and 4) sizable pro forma free cash flow on our 2015 view of over $600 million (12% free cash flow yield). Our 2014 view is raised from $1.19 to $1.20, while our 2015 EPS view becomes $2.25 (from $1.60) and compares to the Street's $1.82."

Must read: Warren Buffett's 25 Favorite Stocks

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Separaetly, TheStreet Ratings team rates STEEL DYNAMICS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate STEEL DYNAMICS INC (STLD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, attractive valuation levels and good cash flow from operations. 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:

  • The revenue growth came in higher than the industry average of 0.2%. Since the same quarter one year prior, revenues rose by 14.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 138.46% and other important driving factors, this stock has surged by 36.31% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • STEEL DYNAMICS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, STEEL DYNAMICS INC increased its bottom line by earning $0.83 versus $0.73 in the prior year. This year, the market expects an improvement in earnings ($1.21 versus $0.83).
  • Net operating cash flow has significantly increased by 132.35% to $76.01 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 -23.29%.
  • You can view the full analysis from the report here: STLD Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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