Wells Fargo Initiates Coverage on Steel Dynamics with Overweight Rating and $143 PT

Wells Fargo Initiates Coverage on Steel Dynamics with Overweight Rating and $143 PT

Wells Fargo has initiated coverage on Steel Dynamics Inc. (NASDAQ: STLD) with an Overweight rating and a price target of $143.00. The investment bank, according to InvestingPro data, currently has the stock trading at $129.24, with analyst targets ranging from $145 to $155, suggesting potential upside [2].

The positive outlook from Wells Fargo is primarily driven by the end of a multi-year approximately $5 billion investment cycle. The bank cited the potential returns on these investments, which have yet to fully materialize, as a key factor in its positive outlook. The recent capital expenditures focused on new plants, including aluminum rolling facilities, downstream steel coating operations, and new steel output capacity, have not yet generated EBITDA, providing "organic growth optionality" for Steel Dynamics [2].

The conclusion of this capital expenditure surge could lead to greater shareholder returns through stock buybacks. However, Steel Dynamics Inc. reported its financial results for the second quarter of 2025, which did not meet analysts’ expectations. The company announced an earnings per share (EPS) of $2.01, falling short of the forecasted $2.26. Revenue was also below projections, coming in at $4.6 billion compared to the anticipated $4.73 billion. These figures highlight a challenging quarter for Steel Dynamics [2].

Steel Dynamics' increased steel shipments and aluminum production are notable. During the second quarter of 2025, the company reported a 4% increase in steel shipments and a 6% rise in ferrous scrap shipments. The company is also nearing completion of a recycled aluminum flat rolled products mill in Columbus, Mississippi, with initial aluminum coil production [3].

The biggest risk for Steel Dynamics continues to be whether capital-intensive new operations can scale without further eroding margins and cash flows. The company's outlook anticipates $21.7 billion in revenue and $2.6 billion in earnings by 2028, based on an 8.1% annual revenue growth rate and an increase in earnings of $1.6 billion from the current $1.0 billion [3].

Five fair value estimates from the Simply Wall St Community range from as low as US$30.80 to as high as US$576.32, showing sharply divided outlooks. Investors should consider the ongoing start-up losses in new aluminum operations, which may weigh on earnings and free cash flow in the quarters ahead [3].

References:
[1] https://www.tradingview.com/news/tradingview:baa252b21ba1b:0-steel-dynamics-inc-sec-10-q-report/
[2] https://www.investing.com/news/analyst-ratings/steel-dynamics-stock-initiated-at-overweight-by-wells-fargo-on-investment-cycle-end-93CH-4191426
[3] https://simplywall.st/stocks/us/materials/nasdaq-stld/steel-dynamics/news/how-investors-are-reacting-to-steel-dynamics-stld-expanding