Invest1 publisher2 min readPublished
Four fifths of Steel Dynamics' 33% revenue gain arrived before the quarter it just guided
Steel Dynamics told investors to expect $6.42bn and $5.34 to $5.38 a share for the third quarter, and the sequential step behind that 33% annual headline is 5.5%. The fabrication backlog is up close to 50%.
The Investor · Invest desk
What happened
- Steel Dynamics pre-announced third-quarter EPS of $5.34 to $5.38, well above prior quarters, and credited metal margin expansion together with record steel shipments.
- The fabrication backlog is nearly 50% higher than a year ago, and all three aluminum cold mills are now operational.
- The share price fell on the guidance, a reaction the Seeking Alpha contributor who wrote up the pre-announcement called overdone while disclosing no position in the stock.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- decision A four-cent range on a $5.36 midpoint leaves almost nothing about September to discover, so a buyer acting on this guide is underwriting the December quarter instead.
- constraint The demand evidence here stops at the four end markets the company named, so a data-centre thesis has to be sourced from somewhere other than this release.
- exposure A fabrication book 50% larger converts at whatever spreads prevail when it ships, and spread sustainability is the condition the contributor set before buying the stock.
The guidance range is four cents wide. Shipments get weighed and margins largely reconciled before a spread that narrow goes out, and on a midpoint of $5.36 this one is about 0.75% [1][1].
Back out the percentages and the revenue line is mostly history. The guided $6.42bn at 5.5% sequential growth implies roughly $6.09bn in the June quarter, and the same figure at 33% above last year implies about $4.83bn in the September quarter of 2024 [2][2][3]. The year-over-year gain is therefore about $1.59bn, and about $335m of it, or 21%, was earned in the quarter being guided [4][5][6]. The other four fifths arrived earlier. A 5.5% sequential pace repeated four times compounds to roughly 24% a year, below the 33% now sitting in the trailing comparison [7].
The level is high and the rate of increase is easing. Those are two different claims about end demand, and the pre-announcement supports the level far better than it supports the trend.
The demand Steel Dynamics names is non-residential construction, energy, automotive and industrial, and data centres are not among them [3][10].
The part of the release that describes work not yet shipped is the fabrication backlog, nearly 50% higher than a year ago [4]. Fabrication and aluminum operations are both expected to improve, with all three aluminum cold mills now operational [5]. The EPS jump itself is credited to metal margin expansion and record steel shipments [1].
Shares fell on the news [6]. The Seeking Alpha contributor who wrote up the pre-announcement wrote that the tumble "is going to be temporary" [7], viewed the reaction as overdone, anticipated a possible third-quarter beat, and said the sustainability of steel spreads and end-market diversification would be monitored before investing [8]. The contributor disclosed no stock, option or derivative position in the company and no plan to take one within 72 hours [9].
In my view this is a strong level with a slowing rate, and the December sequential number is what a buyer is actually paying for. The case on the other side is timing: a fabrication book 50% larger than last year's converts over several quarters, so the sequential rate could step back up when it ships [4]. If December revenue grows another 5.5% and metal margins hold, the acceleration read is right. If sequential growth flattens, the 33% was measured against a trough.
What to watch
- Whether December-quarter sequential revenue holds near the 5.5% pace or flattens out.
- The metal margin line in the actual third-quarter report, since the EPS guide is credited to margin expansion.
- How quickly the fabrication backlog converts into shipments, and at what spreads.