Is Steel Dynamics Stock Underperforming the Nasdaq?

Steel Dynamics, Inc. (STLD), headquartered in Fort Wayne, Indiana, functions as a leading steel producer and metal recycler. Valued at $20.6 billion by market cap, the company’s products include flat-rolled steel sheet, engineered bar, special-bar-quality, and structural beams. It also recycles scrap metals and manufactures non-residential building components such as steel joists, girders, trusses, and decks for construction projects.

Companies worth $10 billion or more are generally described as “large-cap stocks,” and STLD perfectly fits that description, with its market cap exceeding this mark, underscoring its size, influence, and dominance within the steel industry. STLD excels through its diversified operations in steel production, metals recycling, and steel fabrication, ensuring stable revenue streams and mitigating market risks. Its cost-effective production methods, like electric arc furnaces, enhance competitiveness and adaptability, driving profitability in a dynamic market.

Despite its notable strength, STLD slipped 12% from its 52-week high of $155.56, achieved on Nov. 6, 2024. Over the past three months, STLD stock has gained 2.8%, underperforming the Nasdaq Composite’s ($NASX) 14% gains during the same time frame.

In the longer term, shares of STLD rose 20% on a YTD basis, outperforming NASX’s YTD gains of 15.3%. However, the stock climbed 19.5% over the past 52 weeks, underperforming NASX’s 26.3% returns over the last year.

To confirm the bullish trend, STLD has been trading above its 50-day and 200-day moving averages since late April, with some fluctuations. 

STLD's underperformance was driven by trade uncertainties related to tariffs and an inventory overhang of coated flat-rolled steel, which slowed down shipments in the steel and steel fabrication segments.

On Jul. 21, STLD shares closed up more than 2% after reporting its Q2 results. Its EPS of $2.01 fell short of Wall Street expectations of $2.05. The company’s revenue was $4.57 billion, missing Wall Street forecasts of $4.63 billion.

In the competitive arena of steel, Nucor Corporation (NUE) has taken the lead over STLD, showing resilience with a 22.4% uptick on a YTD basis, but lagged behind the stock with marginal returns over the past 52 weeks.

Wall Street analysts are bullish on STLD’s prospects. The stock has a consensus “Strong Buy” rating from the 13 analysts covering it, and the mean price target of $149.92 suggests a potential upside of 9.6% from current price levels.