MENU

BlueScope Steel Limited (ASX:BSL) shares storm 4% higher on guidance upgrade

In morning trade the BlueScope Steel Limited (ASX: BSL) share price has raced to a multi-year high following the release of a trading update.

At the time of writing the steel producer’s shares are up 4% to $18.79.

This means that its shares have now surged over 19% higher since this time last year.

What was in the update?

BlueScope has experienced a better than expected second half in North America, leading to an upgrade to its second half earnings guidance.

According to the update, BlueScope expects underlying earnings before interest and tax (EBIT) for the six months to June 30 to be approximately $680 million. This compares to its prior guidance of $606 million that was given in February.

It will mean that full year underlying EBIT comes in at just under $1,200 billion, up from $1,105 million in FY 2017.

Although the market was largely expecting a lift to its guidance, this upgrade was well above expectations.

Management has pointed to strong steel spreads in North America as being the driver on its stronger than expected performance. The company’s North Star mini-mill in Ohio has been a key performer, benefiting greatly from higher realised steel spreads.

Complementing this strong performance was its Australian steep products business which has been performing ahead of expectations thanks to higher margins on export coke sales.

Should you invest?

Based on this earnings guidance I estimate that BlueScope’s shares are changing hands at approximately 14x forward earnings.

I don’t think that this is too demanding and could make BlueScope worth a closer look.

However, I still see more value in materials sector peers such as BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) and would suggest investors consider them ahead of the high flying steel producer at this stage.

Alternatively, this hot dividend share could be even better. Do you own it?

OUR #1 dividend pick to grow your wealth over the new financial year is revealed for FREE here!

Financial year 2018 is here and The Motley Fool's dividend detective Andrew Page has revealed his must buy dividend share to grow your wealth in 2018.

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.