AK Steel Holding Corporation (AKS), Nucor Corporation (NUE), Steel Dynamics, Inc. (STLD): Is There A Bright Spot In This Industry?

A ‘Nucorish’ case

Relative to the peers, Steel Dynamics, Inc. (NASDAQ:STLD) is well placed to deliver sustainable earnings improvements for the remainder of 2013 and into 2014, driven by the combination of an eventual recovery in construction-related demand, improvements at Steel Dynamics, Inc. (NASDAQ:STLD)’s Mesabi Nugget operations, and the benefits from incremental SBQ (Special Bar Quality) volumes in 2014.

That said, Steel Dynamics, Inc. (NASDAQ:STLD) is already trading at 6.5 times 2013 EBITDA and 5.9 times 2014 EBITDA, giving an impression that much of the good news is already factored into the shares, particularly considering that 2014 EBITDA for Steel Dynamics is representative of a ‘mid-cycle’ EBITDA environment. The current 2014 EBITDA estimate of $950 million would represent two-year EBITDA growth of ~45%, the highest annual EBITDA at the company in six years, and would be only 20% below the peak in 2008.

Final word

The steel industry has a long way to go before it comes out of the problem of overcapacity. Meanwhile, there are some attractive shots in the industry. However, most of them, like Nucor Corporation (NYSE:NUE) and Steel Dynamics, Inc. (NASDAQ:STLD), are already up more than 20% for the year, which makes us believe that much of the good news has already been factored in the stock. Yet, we find likes of AK Steel Holding Corporation (NYSE:AKS) that are expected to display large gains once a bullish catalyst hits the market.

The article Is There A Bright Spot In This Industry? originally appeared on Fool.com and is written by Zain Abbas.

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