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On Tuesday, KeyBanc Capital Markets reaffirmed their positive stance on Steel Dynamics (NASDAQ:STLD), maintaining an Overweight rating and a $155.00 price target. Currently trading at $124.94, the stock has analyst targets ranging from $128.91 to $165.00. The endorsement follows the company’s first-quarter 2025 guidance, which, while slightly below analyst expectations, signals a significant operational improvement, particularly at the Sinton facility. According to InvestingPro analysis, the company appears slightly undervalued based on its Fair Value assessment.
Philip Gibbs, an analyst at KeyBanc, acknowledged that the preliminary guidance for the first quarter was somewhat shy of their projections. He had previously cautioned that the early-year results might bear the impact of the lagged trough pricing from the second half of 2024, which indeed occurred. Despite this, the first-quarter EBITDA showed an approximate 15% quarter-over-quarter increase, even with challenges such as lower fabrication results, additional costs associated with ramping up aluminum production, and a slight compression in sheet spreads. The company maintains robust financial health with an impressive current ratio of 2.53 and has consistently raised its dividend for 12 consecutive years.
The report highlighted that Sinton’s operational performance has notably advanced, with the facility operating at over 90% utilization during the first quarter and the management anticipating profitability in the second quarter of 2025. Gibbs pointed out that the turnaround at Sinton is a critical element in the company’s value creation strategy. InvestingPro data reveals the company’s strong financial position, with a "GOOD" overall health score of 2.84 and liquid assets exceeding short-term obligations.
Steel Dynamics’ strong free cash flow through economic cycles was also emphasized, suggesting the potential for higher capital returns. Additionally, the company’s budding aluminum business is expected to contribute to EBITDA growth from 2026 to 2028, further capturing the interest of KeyBanc analysts.
In summary, Steel Dynamics’ latest guidance and operational improvements reinforce KeyBanc’s confidence in the company’s stock, underpinned by expectations of profitability and growth in the near future. The firm’s analysis suggests that Steel Dynamics is well-positioned to deliver value to its shareholders, despite the initial guidance falling short of expectations.
In other recent news, Steel Dynamics has completed a $1 billion notes offering, comprising $600 million of 5.250% Notes due in 2035 and $400 million of 5.750% Notes due in 2055. The proceeds are intended for general corporate purposes, including potentially repaying existing debt. Additionally, Citi has maintained its Buy rating on Steel Dynamics with a price target of $145, although the company’s first-quarter 2025 earnings guidance is below initial estimates due to lower realized pricing. Wolfe Research has upgraded Steel Dynamics from Underperform to Peer Perform, citing revised steel price projections following the announcement of a 25% tariff on steel imports. The firm expects hot-rolled coil prices to rise to $825 per short ton in 2025, contributing to an anticipated improvement in free cash flow by 2026. Steel Dynamics’ Sinton facility achieved operational levels above 90% in the first quarter of 2025, with expectations of profitability in the second quarter. The company’s aluminum segment has also marked progress, casting its first aluminum ingot in January and nearing completion of key facilities. Recent tariff announcements by President Trump have led to an increase in shares of U.S.-based steel and aluminum companies, including Steel Dynamics, as investors anticipate potential benefits from reduced competition.
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