2010 - A Year Of Only Modest Recovery In Steel

As much as people want to write about the "new economy" and the new rules of economic development, the fact remains that steel is a key component. When economies are strong, there is higher demand for steel in non-residential construction, automobiles and all manner of industrial and consumer goods. To that point, 2010 was a challenging year for steel companies and steel stocks as soft demand capped not only shipment volume but restrained companies from fully pushing on the impact of higher input prices. 

A Rare Laggard In Materials
In almost every other respect, 2010 was a great year for materials companies. While the steel sector still did relatively well (basically tracking the S&P 500), much of that came from a late rally after third quarter earnings and rising optimism about higher prices in 2011. Relative to gold, copper, coal and other industrial metals, steel was a laggard for the year as a whole.

It made relatively little difference whether a company was an integrated global steel producer or a mini-mill. World-leaders like Korea's POSCO (NYSE:PKX) and Europe's ArcelorMittal (NYSE:MT) both saw their stocks decline by double-digit percentages, while U.S. mini-mill operators Nucor (NYSE:NUE) and Steel Dynamics (Nasdaq:STLD) did a fair bit better on a relative basis. American integrated producers U.S. Steel (NYSE:X) and AK Steel (NYSE:AKS) had very mixed performance, as AK Steel's stock fared quite poorly and U.S. Steel did relatively well. (For more, see Is Now The Time To Invest In Steel?.)


Please follow this link for the full piece:
http://stocks.investopedia.com/stock-analysis/2010/2010-A-Year-Of-Only-Modest-Recovery-In-Steel-STLD-NUE-MT-X-AKS1224.aspx

Commercial Metals - A Tough Market May Be Getting Better

Although the sector has had a rough 2010, the stocks of many players have been doing a lot better of late, as investors take a more encouraging view of steel prices and demand in 2011. As Commercial Metals (NYSE:CMC) earnings reflect, though, there are still a lot of pressures in the industry and a great 2011 is no guarantee. 

Fiscal First Quarter Results - Some Good, Some Bad
In many respects, CMC's earnings this quarter are a microcosm of the industry; some good and some bad, with reasons for cautious optimism. On a simple top line basis, for instance, revenue was up 27% from last year as units like recycling and American mini-mills did well (each up about 41%) and no units had year-on-year declines. Within that top line number, the company saw total mill tons shipped increase 9%, with fabrication tons shipped up a similar 8%. Selling prices were also strong, with domestic prices up almost 20% and foreign mill prices up more than 30%.

Profitability also improved from the year-ago level. Although scrap costs were quite a bit higher (up 17% domestically and 23% overseas), per-ton operating profits still grew almost 22% and 45% at home and abroad, respectively. Interestingly, the purchase prices for scrap (as opposed to the cost of scrap used) were even higher, and that could be an issue. Still, the company reversed a year-ago operating loss and was profitable on an as-reported basis. 


This link will take you to the full piece:
http://stocks.investopedia.com/stock-analysis/2010/Commercial-Metals--A-Tough-Market-May-Be-Getting-Better-CMC-STLD-NUE-X-MT-VALE-TCK1223.aspx

Steel Dynamcis - Buy The Muddle-Through?

Just how healthy is the economy, anyway? Retailers have been seeing shoppers return to their stores, and railroads continue to see carload volumes increase, but banks are still struggling and non-residential building is all but asleep. Even aluminum is no help - Alcoa (NYSE:AA) is doing better, but some of that is because of more rational Chinese producers and a recovery in aerospace. It is a very muddled picture, then, for Steel Dynamics (Nasdaq:STLD) as this large mini-mill operator moves into the final quarter of the year.

The Quarter That Was
Steel Dynamics had previously guided third-quarter numbers down, but nevertheless managed to deliver results on the upper side of that range. For a "tough" quarter, sales were surprisingly strong - Steel Dynamics reported 35% revenue growth over last year on 5% higher shipment volume. On the other hand, sequentially, Steel Dynamics saw revenue fall 3% on 4% higher shipments.

Please click below to continue on:
http://stocks.investopedia.com/stock-analysis/2010/Steel-Dynamics-Buy-The-Muddle-Through-STLD-AA-NUE-AKS-PKX-MT-FLR1020.aspx

The Steel Sector: No Jam Today, But Maybe Tomorrow

Investors might feel like the White Queen is running the economy these days. There was good growth in the past, and a lot of people seem to be expecting it again in the not-so-distant future, but it is pretty hard to find in the present. With a series of pre-announcements over the last few days, the steel sector is definitely shaping up as a "jam yesterday, jam tomorrow, sorry ... none today" sort of sector right now. 

Steel Dynamics
To a certain extent, maybe Steel Dynamics' (Nasdaq:STLD) downward revision for the third quarter was not a big surprise. After all, analysts have taken down the numbers on this major mini-mill operator multiple times over the last three months and estimates are now about a third lower.

For the full piece:
http://stocks.investopedia.com/stock-analysis/2010/The-Steel-Sector-No-Jam-Today-But-Maybe-Tomorrow-STLD-NUE-AKS-X-CMC-VALE-CLF0917.aspx

Nucor Not In The Clear

After a few years as an equity analyst, you get a little jaded about management guidance. Some managers are perpetual optimists who always promise and never deliver. Others are more like perpetual Eeyore's and never see anything good happening. 

And then there is the management of Nucor (NYSE:NUE). In all of the years I have paid attention to this company, I have never known management to be anything less than forthcoming and straight-shooting, if somewhat conservative. So when the CEO of Nucor expresses concern about the near-term (six to 12 months) outlook for the economy and steel markets, I tend to listen. 



For the complete piece:
http://stocks.investopedia.com/stock-analysis/2010/Nucor-Not-In-The-Clear-NUE-STLD-CAT-BUCY-WHR0726.aspx

Steel Dynamics Pitted, But Not Rusting

So, how is the economy doing, exactly? Alcoa (NYSE:AA) or CSX (NYSE:CSX) earnings may have you feeling optimistic, while earnings from major banks cast a pall over that scenario. In that context, maybe Steel Dynamics (Nasdaq:STLD) earnings are a perfect metaphor - they were good, but not great, and guidance was a little murky. 

The Quarter That Was
Steel Dynamics reported 5% sequential growth in revenue (to $1.63 billion) and earnings per share of $0.22. Both of these metrics were slightly below the average Wall Street analyst estimate; enough to be a mild disappointment, but nothing to panic about. 


For the full piece, please go to:
http://stocks.investopedia.com/stock-analysis/2010/Steel-Dynamics-Pitted-But-Not-Rusting-AA-CSX-STLD-X-NUE-AKS-WHR0722.aspx

A Rare Opportunity In Steel Dynamics (STLD)

Along with Peabody (which I also wrote on recently), this is one of the few companies where I actually believe what management tells me and trust them to run the business.

Sadly, an increasingly novel concept...

http://community.investopedia.com/news/IA/2008/A-Rare-Opportunity-In-Steel-Dynamics-STLD1022.aspx