Nucor Corporation (NUE), Steel Dynamics, Inc. (STLD), AK Steel Holding Corporation (AKS): What’s In Store for Steel Stocks?

And Steel Dynamics lends company in misery
Adding to the downbeat drumbeat in March was Steel Dynamics, Inc. (NASDAQ:STLD), Inc. (NASDAQ:STLD), which guided investor to flat “adjusted” earnings of $0.17-$0.21 per share, numbers the company says are “comparable” to the “adjusted” $0.20 it earned in Q4 and the straight $0.20 earned in Q1 2012.

Like Nucor Corporation (NYSE:NUE), Steel Dynamics, Inc. (NASDAQ:STLD) is seeing “decreases in galvanized sheet volume” generally. Like Nucor and AK, Steel Dynamics, Inc. (NASDAQ:STLD) likes the prospects in automotive sheet steel. The company sees strength, too, in railroad rails and products used in residential and commercial construction — albeit this growth is off of “base historical lows.”

Foolish takeaway(s)
So what are the key takeaways from all this? Despite pockets of strength, profits growth remains elusive across the steel industry. This seems to be the unanimous consensus of companies that have issued guidance so far.

This also suggests that the relatively high P/E ratios we’re seeing among steelmakers today — 22 times earnings at Steel Dynamics, Inc. (NASDAQ:STLD), 29 times earnings at Nucor Corporation (NYSE:NUE), and infinity times non-existent earnings at unprofitable AK Steel Holding Corporation (NYSE:AKS), USX, and Arcelor — may not be sustainable.

And as for all those single-digit forward P/Es that analysts are projecting based on hoped-for earnings growth next year? Feel free to hope for them, but so far, the evidence doesn’t seem to support the case.

The article What’s In Store for Steel Stocks? originally appeared on Fool.com is written by Rich Smith.

Fool contributor Rich Smith has no positions in the stocks mentioned above. You can find him on Motley Fool CAPS, publicly pontificating under the handle TMFDitty, where he’s currently ranked No. 326 out of more than 180,000 members.The Motley Fool recommends Nucor. The Motley Fool owns shares of ArcelorMittal.

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