BMO Capital analyst David Gagliano raised his price target on Steel Dynamics to $40 and kept his Outperform rating in spite of its Q2 earnings miss. The analyst says he is cautious about the near-term outlook for North American steel prices but also sees some "recent improvement" in the company's underlying fundamentals. Gagliano also believes that Steel Dynamics' current valuation does not account for the benefits of his expected volume growth for the company over the next 3 years.

Reports Q1 revenue $4.7B, consensus $4.74B. "The teams executed well delivering a solid first quarter performance," said Mark D. Millett, Chairman and Chief Executive Officer. "Underlying steel demand was steady in the quarter; however, we experienced some steel order volatility early in the quarter as customer inventories remain incredibly low and scrap prices declined month over month in the quarter. Customer orders rebounded strongly in March supporting increased pricing and solid order backlogs, especially within our value-added coated flat rolled steel products portfolio. The teams achieved strong first quarter 2024 operating income of $751 million and adjusted EBITDA of $879 million," continued Millett. "The sequential improvement in earnings was driven by our steel and metals recycling businesses and supported by continued historically strong results from our steel fabrication operations. Across the company, our teams achieved strong performance, while keeping each other safe."

Pre-earnings options volume in Steel Dynamics is 1.7x normal with puts leading calls 8:5. Implied volatility suggests the market is anticipating a move near 3.3%, or $4.48, after results are released. Median move over the past eight quarters is 4.0%.