Steel Dynamics is Friday's IBD Stock Of The Day as management touted steel price increases heading into 2024 and indicated that Q4 earnings will top current forecasts. STLD stock broke out of a cup-with-handle base, continuing its surge following Wednesday's Federal Reserve meeting.
STLD stock led other steel stocks higher, including U.S. Steel, which gave its own well-received earnings update after the close on Thursday. Nucor, which announced below-expected guidance for Q4 on Thursday morning, also joined the rally.
Fed Soft-Landing Boosts Steel Stocks
The positive earnings updates from STLD and X stoked enthusiasm, but the biggest factor driving the stocks this week was the Fed and Chair Jerome Powell's determination to nail a soft landing. With inflation close to the Fed's 2% goal on a six-month annualized basis, Powell has shifted focus to not keeping policy tight for too long.
Risk of an economic downturn has largely dissipated, with the S&P 500 hitting a new high, the 10-year Treasury yield falling below 4%, and markets pricing in 1.5 percentage points of rate cuts next year. That will brighten the outlook for big steel industry customers, like the auto and construction industries.
STLD Earnings Outlook
Steel Dynamics said Q4 earnings should be $2.60-$2.64 a share. That's down 24% from Q3 and 27.5% from a year ago, but above $2.40 analyst estimates.
"Steel order activity remains solid, as evidenced by extended order lead times and recent pricing increases" heading into Q1, the company said in a statement.
Steel Prices
Near-month Midwest domestic hot-rolled coil steel futures pricing has climbed to $1,068 per metric ton, up from a low around $700 in September and the first half of October. Settlement of the United Auto Workers strike has been among the factors leading to firmer pricing.
U.S. Steel said on Thursday that it is "successfully negotiating annual auto contracts for incremental volumes."
On Tuesday, JPMorgan analysts hiked their STLD stock price target to 98 from 95, noting that the coming update for Q4 earnings wouldn't see much benefit from recent price increases due to lagged contract pricing. But the firm said that benefits of mill discipline, meaning the avoidance of oversupply, and price gains should be realized in Q1.
STLD Stock
Steel Dynamics stock climbed 4.5% to 124.54 in Friday afternoon market action. The move carried STLD past a 120.60 buy point from a cup-with-handle base. The buy zone runs through 126.63.
X stock added 1.4% to 39.41 to a five-year high. On Wednesday, X stock surged 6%, helped by a CNBC report that multiple bidders have offered more than $40 per share to buy U.S. Steel.
NUE stock rose 0.9% to 172.36, briefly clearing a 172.81 handle entry. Nucor popped 2.5% on Thursday, despite the profit warning.
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