Shareholders in Steel Dynamics, Inc. (NASDAQ:STLD) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.
Following the upgrade, the current consensus from Steel Dynamics' seven analysts is for revenues of US$13b in 2021 which - if met - would reflect a major 35% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 181% to US$7.32. Before this latest update, the analysts had been forecasting revenues of US$12b and earnings per share (EPS) of US$4.47 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
It will come as no surprise to learn that the analysts have increased their price target for Steel Dynamics 11% to US$49.22 on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Steel Dynamics at US$56.00 per share, while the most bearish prices it at US$33.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Steel Dynamics' growth to accelerate, with the forecast 35% annualised growth to the end of 2021 ranking favourably alongside historical growth of 7.2% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.8% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Steel Dynamics is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Steel Dynamics could be worth investigating further.
Analysts are clearly in love with Steel Dynamics at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as a weak balance sheet. For more information, you can click through to our platform to learn more about this and the 3 other flags we've identified .
We also provide an overview of the Steel Dynamics Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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