Steel Dynamics (STLD, Financial) +4% and Nucor (NUE, Financial) +0.7% have both issued downside Q3 EPS guidance.
- Steel Dynamics (STLD, Financial) expects Q3 EPS of $1.94-1.98, below analyst expectations of over $2.00 per share. The decline is attributed to lower average realized pricing within its flat rolled operations, which are largely contractually based and tied to lagging pricing indices.
- Despite this, STLD noted that underlying steel demand remains steady. Flat rolled steel prices have stabilized and even improved in Q3. While not providing guidance beyond Q3, STLD expects improved volumes in 2025 as interest rates decline. The US infrastructure program and onshoring are also anticipated to boost demand for steel joist and deck products, as well as flat rolled and long product steels.
- Although STLD did not provide a market segment breakdown, it mentioned in its Q2 call that North American automotive production estimates for 2024 were revised to a strong 16 million units, with continued growth expected in 2025 and 2026. Nonresidential construction remains stable despite some slowdowns due to higher interest rates.
- Nucor (NUE, Financial) expects Q3 adjusted EPS of $1.30-1.40, with a more pronounced downside guidance than Steel Dynamics. Nucor noted lower average selling prices in its steel mills segment but did not provide further details.
Interestingly, shares of both companies are trading higher despite the downside guidance, with STLD performing better than NUE. Investors seem to interpret the guidance as not as bad as feared, particularly for Steel Dynamics. STLD's comments on price stabilization were also seen positively. Additionally, there is anticipation ahead of the expected Fed rate cut, which could spur customers to greenlight construction projects and increase spending in the industrial and manufacturing sectors.
