Steel Dynamics stock rating upgraded at BMO Capital

On Monday, BMO Capital Markets raised its rating on shares of Steel Dynamics (NASDAQ:STLD) from Market Perform to Outperform, and also increased the price target to $145 from $135. With a market capitalization of $18.58 billion and annual revenue of $17.54 billion, Steel Dynamics stands as a top-tier domestic steel producer in the United States, with a product mix poised to benefit from the expanded Section 232 tariffs. According to InvestingPro data, the company trades at an attractive P/E ratio of 12.56, suggesting reasonable valuation levels relative to its growth prospects.

Steel Dynamics is recognized for its strong position in the steel industry and is expected to see a positive shift with its Sinton operations. As the company nears the end of a multi-year investment cycle, analysts at BMO Capital anticipate Steel Dynamics to generate free cash flow (FCF) that surpasses that of its peers. This commitment to shareholder returns is evident in the company’s impressive 12-year streak of dividend increases and current dividend yield of 1.61%. InvestingPro analysis reveals that management has been aggressively buying back shares, demonstrating confidence in the company’s future prospects.

The analyst’s statement underscored the reasons behind the upgraded rating and increased price target, citing, "We are upgrading our rating to Outperform (from Market Perform). Steel Dynamics is a best-in-class domestic US steel producer, with a product portfolio that is relatively well-positioned to benefit from expanded Section 232 tariffs. Further, with Sinton expected to turn a corner and multi-year investment cycle approaching completion, Steel Dynamics is expected to deliver above-peer FCF generation, which should support healthy shareholder returns. We are increasing our estimates and target to $145."

The positive outlook from BMO Capital Markets reflects the company’s strategic positioning and financial prospects. Steel Dynamics’ focus on completing its investment cycle and leveraging the benefits of trade tariffs appears to set the stage for financial performance that could potentially reward its investors. The revised price target of $145 represents BMO Capital Markets’ confidence in the company’s ability to outperform within the industry. InvestingPro data supports this outlook, showing a "GOOD" overall financial health score, with particularly strong marks in profitability and price momentum. Discover more insights about Steel Dynamics and access comprehensive analysis of 1,400+ US stocks through InvestingPro’s detailed research reports.

In other recent news, Steel Dynamics has completed a $1 billion notes offering, consisting of $600 million of 5.250% Notes due in 2035 and $400 million of 5.750% Notes due in 2055. The proceeds from this offering are intended for general corporate purposes, including repaying existing debt. UBS has upgraded Steel Dynamics’ stock rating to Buy, maintaining a price target of $149, citing stronger-than-anticipated tariff protection and potential organic growth prospects. Citi has maintained its Buy rating on Steel Dynamics, with a price target of $145, despite adjusting the company’s first-quarter earnings per share expectations to align with recent guidance. KeyBanc also reaffirmed an Overweight rating with a $155 price target, noting significant operational improvements at the Sinton facility. Steel Dynamics’ Sinton operations have reached over 90% utilization, with profitability anticipated in the second quarter of 2025. The company has also marked a milestone in its aluminum segment with the casting of its first aluminum ingot and expects to begin shipments by mid-2025. These developments underscore Steel Dynamics’ strategic efforts to enhance its financial performance and operational capabilities.

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