‘Strong demand’: Bluescope share price strengthens on guidance upgrade

BlueScope is heading for blue skies today…

| More on:
A fit man flexes his muscles, indicating a positive share price movement on the ASX market

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The BlueScope Steel share price is up 2% to $18.30 after releasing an earnings guidance upgrade
  • Second half EBIT is now expected to be between $1.375 billion to $1.475 billion
  • Better realised spreads and steel prices in the United States is behind the upgrade

The BlueScope Steel Limited (ASX: BSL) share price is getting attention on Wednesday morning following its latest announcement.

Shares in the big-name steel producer are swelling by 2%, trading at $18.30 per share in the process. Although, earlier in the session, the company’s shares hit an intraday high of $19.24. For context, it is a rather green morning on the ASX. The S&P/ASX 200 Index (ASX: XJO) is trading 1.05% higher within the first hour of the morning bell.

Second half looks more solid

Working in a commoditised business, much of BlueScope’s financial success comes down to the market price of steel. Today, the $8 billion steel manufacturer has informed investors that this time prices are working in its favour.

According to the release, shareholders are in for a better than previously expected result for the second half of FY2022. The company has lifted its forecast for underlying earnings before interest and tax (EBIT) to between $1.375 billion to $1.475 billion. Whereas, the prior guidance was for $1.2 billion to $1.35 billion.

The guidance revision represents an approximate 15% lift to the lower range and around 9% increase to the higher end. This improvement is likely behind the strong BlueScope share price today. However, BlueScope caveated this guidance by noting it was subject to spread, foreign exchange, and market conditions.

Importantly, the reason for the upgrade is the stronger outlook laying ahead for the company’s North Star and North America coated business. Meanwhile, the other areas of BlueScope’s operations remain in line with prior guidance.

Commenting on the update, BlueScope managing director and CEO Mark Vassella said:

Throughout recent macroeconomic and geopolitical volatility, BlueScope has continued to demonstrate strength and resilience in its business performance.

In the current strong demand environment, the entire BlueScope team is working as hard as they can to improve our service levels, which have been impacted by supply chain and pandemic-related disruptions.

The company’s full-year results are expected to be released on 15 August 2022.

BlueScope share price recap

The BlueScope Steel share price is down 16.5% since the beginning of the year, despite steel prices being slightly higher.

It appears the market is cautious about valuing BlueScope based on its current earnings. The reason for this observation is the company currently trades on a price-to-earnings (P/E) ratio of 3.6 times. Comparatively, the metals and mining industry carries an average P/E of 10.4 times.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

A drawing of a rocket follows a chart up, indicating share price lift
Materials Shares

‘Nothing has changed’: Why the Lake Resources share price is rocketing 19% today

The company has clarified an update released to the market on Monday.

Read more »

Team celebrating corporate success screaming with joy.
Materials Shares

Wow! Novonix share price rebounds off a 52-week low to surge 11%

Novonix shares are on fire today, as are several battery and lithium shares.

Read more »

Man with rocket wings which have flames coming out of them.
Materials Shares

Vulcan share price rockets 25% on Stellantis deal

This lithium share is rocketing higher on Friday. Here's why...

Read more »

ASX share price on watch represented by surprised man with binoculars
Materials Shares

Vulcan share price on watch amid landmark $76 million automaker investment

This lithium share could have a good day on Friday...

Read more »

A man holds his head and look in horror at a betting slip, indicating share price drop on the ASX market
Materials Shares

The Lake Resources share price has crashed 50% since joining the ASX 200 on Monday. What’s going on?

Lake Resources shares are having a disastrous week...

Read more »

A couple sits on a sofa, each clutching their heads in horror and disbelief, while looking at a laptop screen showing the Nickel Industries share price has dropped by 36% since early March
Materials Shares

Sayona share price dives 8% despite lithium news

The company's share price is slipping despite a potential lithium find.

Read more »

Codan share price A dismayed kid dressed as a scientist stands with his back to a rocket crashed into the ground
Materials Shares

Leo Lithium share price fails to roar and sinks 26% following demerger

Leo Lithium shares aren't roaring after their listing...

Read more »

a young woman raises her hands in joyful celebration as she sits at her computer in a home environment.
Materials Shares

Pilbara Minerals share price storms higher amid ‘unprecedented demand’ for lithium

This lithium share is having a good day...

Read more »