On Wednesday, Citi reaffirmed its Buy rating on shares of Steel Dynamics (NASDAQ:STLD), maintaining a price target of $160.00. The endorsement comes as the firm adjusts its second-quarter earnings per share (EPS) projections to $2.64, aligning with the company's guidance range of $2.64 to $2.68 per share. The revision is based on an anticipated $0.70 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA).
Despite the positive outlook for the second quarter, Citi has lowered its estimates for the third and fourth quarters due to a sharper-than-anticipated decline in sheet prices. The third quarter is expected to be weaker, with an estimated $0.56 billion in EBITDA, as July and August sales are nearly complete, and prices for joist and deck are projected to remain stable.
The fourth quarter, however, may experience a seasonal uptick in sheet prices, which could be balanced out by a reduction in shipments, resulting in a forecasted EBITDA of $0.63 billion.
Citi's long-term expectations for Steel Dynamics remain unchanged, with a 2025 EBITDA projection of $3.1 billion. The firm's stance is that the current weakness in the steel market is temporary and that medium-term trends will be positive. These trends include industry consolidation, disciplined pricing, the impact of tariffs, and sustained demand driven by infrastructure projects and domestic manufacturing initiatives.
In other recent news, leading U.S. steel manufacturers, including Nucor (NYSE:NUE), Steel Dynamics, and U.S. Steel, are set to report a decline in Q2 earnings, according to recent analyst notes. The steel industry is facing challenges due to a decrease in steel prices, driven by a surplus in supply and lower demand.
Steel Dynamics recently completed a $600 million note offering, aimed at bolstering the company's long-term financial strategy. The company also saw its share target cut by BMO Capital Markets and Jefferies due to a lower EPS outlook for Q2.
Meanwhile, Citi maintained a 'Buy' rating on Steel Dynamics, highlighting a stable outlook for the company's fabrication segment. These recent developments provide crucial insights for investors monitoring the steel industry.
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