Citi has reiterated its Buy rating for Steel Dynamics (NASDAQ: NASDAQ:STLD), maintaining a price target of $160.00.
The firm updated its model for the company, setting the fourth-quarter EBITDA at $416 million, which marks a 20% decrease from the previous quarter, attributing the decline to seasonal effects and price lags.
The forecast for the year 2025 EBITDA is now at $2.6 billion, showing a slight increase of 3% compared to the previous estimate.
During the recent earnings call, Steel Dynamics confirmed its optimistic future outlook. The company's focus is on the Sinton facility and the upcoming aluminum rolling mill, which together are projected to contribute approximately $1 billion to EBITDA ($400 million from Sinton and $600 million from the aluminum mill). Sinton is aiming for 75% target achievement in the fourth quarter, but the timeline for reaching full potential remains uncertain. Meanwhile, the aluminum rolling mill is on schedule to commence operations in the second quarter of 2025.
In other recent news, Steel Dynamics reported a net income of $318 million and revenues of $4.3 billion for the third quarter of 2024. The company also reported steel shipments totaling 3.2 million tons and an adjusted EBITDA of $557 million.
Despite a challenging market environment and increased steel imports pressuring the domestic market, Steel Dynamics anticipates steady demand in steel fabrication and metals recycling. The company also revealed plans for an aluminum expansion, with expectations of EBITDA positivity for aluminum production in the second half of 2025.
Steel Dynamics is investing heavily in this area, with $1.9 billion already invested and an additional $350-400 million projected for Q4 2024. The company intends to operate a new aluminum rolling mill at 75% capacity in 2026.
InvestingPro Insights
Steel Dynamics' financial metrics and recent performance align with Citi's optimistic outlook. According to InvestingPro data, the company boasts a market capitalization of $20.84 billion and a P/E ratio of 11.73, suggesting a potentially undervalued stock relative to its earnings. The company's revenue for the last twelve months stands at $17.9 billion, with a gross profit margin of 17.27%.
InvestingPro Tips highlight Steel Dynamics' strong financial position and shareholder-friendly policies. The company has maintained dividend payments for 21 consecutive years and has raised its dividend for 11 consecutive years, demonstrating a commitment to returning value to shareholders. This aligns with the company's growth story and potential for increased earnings from new facilities like Sinton and the upcoming aluminum rolling mill.
Moreover, Steel Dynamics' management has been aggressively buying back shares, which could indicate confidence in the company's future prospects. This action, combined with the company's ability to cover interest payments with its cash flows and operate with a moderate level of debt, supports Citi's positive stance on the stock.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Steel Dynamics, providing a deeper insight into the company's financial health and market position.
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