Steel Dynamics: 2Q Mid-Quarter Guide: EPS Guide Misses; Steel Ops Tailwinds Offset by ADI/Steel Fab Headwinds

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Steel Dynamics: 2Q Mid-Quarter Guide: EPS Guide Misses; Steel Ops Tailwinds Offset by ADI/Steel Fab Headwinds

given relative safe haven status from the Middle East conflict and structurally Quarterly Forecasts (FYE Dec)

improved metals margins with S232 tariffs. However, momentum began to unwind Adj. EPS ($)

2025A 2026E 2027E

this week following news of a peace deal, driving risk-on sentiment and rotation into Q1 1.44 2.78A 4.42

more beta-levered metals. Q2 2.01 3.55 4.90

Q3 2.73 5.07 4.90

• Expect better-than-seasonal pricing ahead of imports: Steady demand and Q4 1.82 4.39 4.43

limited spot availability have resulted in extended lead times and lean customer FY 8.00 15.78 18.66

inventories as service center shipments outpace intake from mills, a dynamic

Style Exposure

we feel can support pricing through the typical summer slowdown and at least

well into 3Q until import arrivals ramp more meaningfully (link). SMU’s

domestic HRC lead times are tracking at ~7.5 weeks, the longest since Oct’21,

while SMU’s May’26 service center sheet inventories were the lowest since

Apr’21. This has buyers increasingly looking past freight costs/extended lead

times towards imports to supplement supply, with Platts reporting HRC import

offers for Sep-Oct’26 delivery and May’26 import license data the highest

since Jul’25, albeit still -15% Y/Y (link).

• Staying N rated with unchanged $262 Dec-26 PT: We cut our 2Q EBITDA

by 10% to $861M with EPS at the high end assuming ADI losses persist at a

lighter run-rate and directionally higher intersegment eliminations at the mill

segment. We leave our out-year estimates largely unchanged, but suspect Steel

Fab margins could come under further pressure before easing later in the year

when pricing may also begin to trend higher.