U.S. steel investors will be watching closely next week as two bellwethers for the domestic steel business are expected to release Q3 guidance. Jefferies analyst Seth Rosenfeld says Nucor Corporation(NYSE: NUE) will likely disappoint Wall Street by guiding for Q3 EPS of around 80 cents, while Steel Dynamics, Inc. (NASDAQ: STLD) will come closer to consensus estimates by guiding for EPS of 65 cents.
Update: On Friday morning, Nucor said it sees Q3 GAAP of 75 cents-80 cents, which doesn’t compare to $1.02 estimates.
Prior to hurricanes Harvey and Irma, the U.S. steel industry was demonstrating surprising seasonal strength in the third quarter. Through early September, weekly U.S. production was up 4 percent year-over-year and up 1 percent compared to Q2. However, Rosenfeld says Harvey and Irma likely had a negative impact on the Q3 production and shipments of Nucor, Steel Dynamics and Commercial Metals Company (NYSE: CMC), all of which operate in the South.
“Both NUE/STLD 3Q17 guidance expected next week may come below sell-side expectations, but likely match already cautious buy-side, with downside risks from recent hurricanes unknown,” Rosenfeld wrote. Despite headwinds from the hurricanes, the potential for an expanding metal spread into Q4 makes any guidance-related sell-off a buying opportunity next week.
Jefferies anticipates United States Steel Corporation (NYSE: X) to maintain its previous full-year 2017 EBITDA guidance of $1.1 billion.
Jefferies estimates Q3 U.S. HRC prices to average $626/ton, up $10 from Q2. Iron ore prices are also expected to jump $10 to $73/ton. HRC spreads are expected to decrease by $6 per ton to $262.
Jefferies maintains…
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