BlueScope (ASX:BSL) share price rises on earnings upgrade

High steel demand and prices are putting BlueScope in a good position…

| More on:
Three workers jump in the air at a steel factory.

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

The BlueScope Steel Limited (ASX: BSL) share price has been reinvigorated on Thursday. This comes as the steel producer reveals better than expected performance in an announcement this morning.

At the time of writing, BlueScope shares are trading 2.73% higher to $20.68. This means the BlueScope share price is now 20.9% away from its 52-week high.

What did BlueScope announce?

During a period where China's steel output has been at multiyear low levels, BlueScope appears to have filled the gap in supply.

According to its release, the company now expects its first-half earnings for FY2022 to be above previous forecasts. BlueScope mentioned it is benefitting from strong spreads, prices, and demand amidst the ongoing challenges of the COVID-19 pandemic.

As a result, underlying earnings before interest and tax (EBIT) for H1 FY22 are expected to be between $2.1 billion to $2.3 billion. For context, the company's previous guidance ranged between $1.8 billion to $2 billion. It is worth mentioning that this forecast came with a disclaimer, with forecasts being subject to foreign exchange and market conditions. As such, the BlueScope share price is gaining attention on Thursday.

Furthermore, the steelmaker provided a few other contributing factors to the improved outlook. These included:

  • Stronger than expected hot rolled coil prices and spreads at its North Star mini-mill in the United States
  • Improved margins and domestic demand for steel products from its Australian Steel Products brand
  • Continued strong demand and pricing for its United States coated products business

These beneficial impacts mean BlueScope is seeing a further increase in net working capital employed in the business during the current half.

Management commentary

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

The performance continues to demonstrate the value of our business model, and further underpins our capacity to invest for long-term sustainable earnings and growth, to position the business for a low carbon future and to deliver solid returns to shareholders.

For investors seeking more details, the company stated it will provide more information at its 2021 annual general meeting on 18 November.

On another note, reports are circulating that China's steel production is beginning to recover. In some areas, power restrictions have eased, allowing steel mills to increase output again.

BlueScope share price recap

Shareholders of BlueScope have enjoyed market-beating returns over the past 12 months. While the S&P/ASX 200 Index (ASX: XJO) is up 19.7% in the last year, the BlueScope Steel share price has returned 37.2%.

Despite the strong share price appreciation, BlueScope is currently trading on a price-to-earnings (P/E) ratio of 8.91.

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 Bruce Jackson.

More on Materials Shares

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Materials Shares

Are BHP shares a bargain buy?

Are analysts bullish on this beaten down mining stock? Let's find out.

Read more »

A group of people in suits and hard hats celebrate the rising share price with champagne.
Materials Shares

This ASX mining stock is jumping 11% on big news

This miner is having a good session on Thursday. Let's find out why.

Read more »

Lion leaping with mouth open, symbolising a rising Liontown share price.
Materials Shares

Why is the Liontown share price leaping 9% on Tuesday?

This ASX lithium share is the fastest mover of the ASX 200 today.

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Materials Shares

Why is this ASX 300 lithium stock sinking 17% today?

What's going on with this lithium stock today? Let's find out.

Read more »

Man holding a calculator with Australian dollar notes, symbolising dividends.
Materials Shares

$10k invested in Pilbara Minerals shares 5 years ago is now worth…

Let's see if this lithium miner delivered the goods for investors.

Read more »

Female miner in hard hat and safety vest on laptop with mining drill in background.
Broker Notes

Experts reveal 2 buys and 1 sell in the ASX 200 materials sector

And they're not all mining companies, either.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Materials Shares

Pilbara Minerals shares jumps 10% on big news

This lithium miner is having a day to remember on Wednesday. But why?

Read more »

Three miners looking at a tablet.
Materials Shares

Why Bell Potter says this ASX mining stock is a top buy

Let's see which stock the broker is tipping to deliver big returns.

Read more »