Wall Street Believes Winter Is Coming For Steel Dynamics

Metal spreads have continued to improve, but steel prices in the U.S. have come off their highs and analysts are now modeling 2018 as the peak year for Steel Dynamics’ (STLD) EBTIDA for this cycle. Fading prices and fading EBITDA expectations are never a good combo for commodity companies, and although these shares have outperformed peers on a one-year and year-to-date basis, the performance in recent months has been lackluster.

I do believe that Steel Dynamics is undervalued now and I do believe this is a relatively better place to be in the steel sector, but this looks more and more like a difficult place to make money for at least the next few quarters. Protectionist measures and a healthy economy may support a “stronger for longer” steel cycle, but I think it will be hard for these shares to significantly outperformance unless pricing and/or volumes really surprise.

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Wall Street Believes Winter Is Coming For Steel Dynamics