IBD Stock Analysis
- Breaks out past 63.28 double-bottom buy point
- Also reclaims 50-day line, breaks above trend line
- Extends post-earnings run, other steelmakers report booming growth
Industry Group Ranking
* Not real-time data. All data shown was captured at
1:10PM EDT on
Steel Dynamics (STLD) is the IBD Stock Of The Day as a bullish demand outlook and growth initiatives boost the Fort Wayne, Ind., steelmaker and its peers. STLD stock has a particularly timely setup, rising past a buy point from a double-bottom base on Thursday.
Thursday’s move by Steel Dynamics comes as ArcelorMittal (MT), the biggest steelmaker outside China, posted better-than-expected results late Wednesday and boosted forecasts for the steel global demand outlook.
The steel industry group also may be getting a lift from progress on a $1.2-trillion bipartisan infrastructure deal that cleared a key Senate hurdle on Wednesday.
U.S. Steel (X), Cleveland-Cliffs (CLF) and Nucor (NUE) also joined in the rally. Other industrial materials stocks also shone. Iron ore and copper stocks including Rio Tinto (RIO), Teck Resources (TECK) and Freeport-McMoRan (FCX) also advanced to or near early entry points. Vale (VALE) stock dipped, just shy of an official buy point, after surging earnings apparently came up short.
While the seven-week base is fairly short, STLD stock’s consolidation really began a month earlier. Steel Dynamics’ relative strength line, which tracks progress vs. the S&P 500, has come off its highs amid the stock market’s recent rotation to growth stocks.
However, its vitals look robust. STLD stock is a leader in one of the stock market’s strongest group. Steel-Producers are ranked No. 7 among 197 industry groups, based on stock performance and momentum. Steel Dynamics has a stellar 99 IBD Composite Rating, a single score factoring in both fundamental and technical strengths.
STLD stock has raced up from the bottom following strong Q2 results on July 19.
Steel Dynamics reported EPS surged 623% with revenue spiking 113% to $4.47 billion. The company sees strong demand lasting.
Steel Dynamics also provided a bullish update on its Sinton, Texas, flat rolled steel mill investment. Despite a weather delay, production should begin to ramp in the fourth quarter and add about $500 million in EBITDA in 2023.
ArcelorMittal, Other Steel Stocks Rally
Late Wednesday, ArcelorMittal reported Q2 EPS of $3.47 vs. a year ago loss and estimates of $2.70. Revenue rose 76% to $19.3 billion. The company said its results were the best since 2008, partly due to the end of export subsidies from China, which has stopped creating a global steel glut.
ArcelorMittal said it now expects global steel consumption to rise 7.5%-8.5% this year, boosting its forecast range from 4.5%-5.5%. The company hiked 2021 capex outlook to $3.2 billion from $2.9 billion, as it capitalizes on strong demand. Still, it launched a $2.2-billion share buyback after cashing in preferred shares of Cleveland-Cliffs, which bought its U.S. operations last year.
MT stock, the IBD Stock Of The Day on Tuesday, rose 2.45% to 35.13, striding further into a buy zone. On Wednesday, ArcelorMittal cleared a 34.06 buy point from a seven-week consolidation, according to MarketSmith.
Cleveland-Cliffs, the big U.S. iron ore and steel supplier, cleared a 24.87 buy point intraday, closing up 5.5% to 24.86. However, CLF stock looks extended from its 50-day line. Cleveland-Cliffs raced past an early entry point around 23.55 on Wednesday. CLF stock is part of the elite IBD 50 stock list.
On Wednesday, Cleveland-Cliffs said it had redeemed $1.2-billion worth of preferred stock held by ArcelorMittal. B. Riley analyst Louis Pipes said the transaction’s favorable terms added $1.50-per-share in value to CLF stock, which he called “grossly undervalued.”
Last week, Cleveland-Cliffs reported booming quarterly earnings.
Meanwhile, U.S. Steel and Nucor both broke clear of their 50-day lines on Thursday. U.S. Steel stock rose 3.75% to 25.47, clearing an early entry point around 25.38. Nucor climbed 4.1% to 103.45.
Please follow Jed Graham on Twitter @IBD_JGraham for coverage of economic policy and financial markets.
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