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Steel Dynamics (STLD) tends to provide EPS guidance around midway through the last month of every quarter. This steel producer maintained that routine this morning. Unfortunately, the Q4 EPS guidance at $1.26-1.30 was well below analyst expectations. This was STLD's third consecutive quarterly downside guidance, which is not a trend we like to see. In fairness, cold weather and the holidays tend to make Q4 a seasonally slower quarter, but this was still a letdown.

• The company expects its Q4 EPS to be meaningfully lower than Q3 results, based on lower prices, seasonally lower shipments, and an unplanned outage at its Butler Flat Roll Division. On the positive side, STLD said that flat rolled steel prices have stabilized. Also, underlying steel demand remains seasonally steady for the primary steel consuming sectors, as evidenced through solid customer order activity. Customers have been positive concerning the business outlook for 2025.
• Turning to its metals recycling operations, STLD expects Q4 results to be significantly higher than Q3, based on steady ferrous volume and flat average realized pricing. However, Q4 earnings from its steel fabrication operations are expected to be lower than Q3, based on seasonally lower shipments and less than a 5% decline in average realized pricing. The order backlog is steady, extending deep into 1H25 at attractive pricing levels.
• Steel Dynamics did not provide guidance for 2025, but did say current order activity is steady with expectations for improved volumes in 2025 as interest rates decline. Also, the US infrastructure program and onshoring are expected to positively impact demand for not only steel joist and deck products, but also for flat rolled and long product steel.

The stock is not moving on this news very much. We suspect that investors were already expecting a rough Q4 as steel prices remain depressed. The Trump tariffs should help decrease steel imports. However, while that is good for steel companies, that is likely to raise prices for steel consumers, including companies that make cars, appliances etc. They will pass those costs on to consumers, who are already feeling the inflation pinch. That may apply pressure to reduce the tariffs.

What STLD really needs is for interest rates to come down, which should unlock pent-up construction projects, increase demand for vehicles and get the housing market back on track, which impacts appliance sales. However, there are fears that some of the stated priorities of the new administration (tariffs, mass deportations leading to labor shortages and higher labor costs, tax cuts leading to higher deficit spending) could reignite inflation. And that may cause the Fed to pause on cutting rates. We see these concerns in how Treasuries are trading. After an initial post-election drop in rates, they have traded back up.