STLD — Q3 2026 Financial Report Analysis

Steel prices up $281 a ton on a year ago, scrap up $23: profit nearly doubles, but EPS lands below the company's own guidance

Steel Dynamics earned $756 million in Q3 2026 (the three months to September 30), or $5.26 per diluted share, against $2.74 a year earlier (+92%) and $3.69 in Q2. Net sales rose 35% to $6.51 billion. As in Q2, the driver was the gap between what the company charges for steel and what it pays for the scrap metal it melts down to make it. That gap widened again this quarter, because selling prices kept rising while scrap got slightly cheaper than in Q2. One caveat: on September 17 the company had guided Q3 EPS to $5.34–$5.38, and the reported $5.26 is below the bottom of that range.

This report is written from the earnings release (Exhibit 99.1 to the 8-K filed October 20, 2026). The full 10-Q for the quarter has not been filed yet, so the management discussion of segment margins and per-segment spreads that the 10-Q usually contains is not available. Everything below comes from the release's text and tables.

Key figures

Adjusted EBITDA is the company's own non-GAAP measure (not defined by accounting rules): earnings before interest, tax, depreciation and amortization, with a few non-cash items such as unrealized derivative gains and stock compensation adjusted out. The "rough spread" row is our own subtraction of the two per-ton figures the release gives. The company's official "metal spread" uses its own cost basis and will appear in the 10-Q, so treat ours as a direction, not the company's number.

Where the profit came from, by segment

Steel. Steel is responsible for essentially all of the gain. Its operating income rose $535 million year on year, more than the $499 million rise in consolidated operating income. The release credits "record steel shipments and metal spread expansion, as average realized steel selling prices increased and scrap raw material costs declined." Management describes the market as "steady demand, low customer inventories, and historically low import levels," with lead times (how long buyers wait for delivery) getting longer and spot steel harder to find. It also says that coated flat-rolled imports "abated due to recent trade actions," which widened spreads on its higher-value coated products. Energy, non-residential construction, automotive and industrial customers led demand. Long products (structural beams and railroad rail) were described as "extremely strong."

What the shipment record does and doesn't show. The 3.78 million tons shipped is a record, but the company's own mills shipped about the same as before. Shipments from the three flat-rolled mills (Butler, Columbus and Sinton) fell 5.5% from a year ago, to 2.02 million tons, while long-product divisions rose. Most of the volume gain came from the steel processing divisions, which cut, coat and distribute steel. Their shipments rose 37% to 743,000 tons, and that line has included New Process Steel, a metals processor the company took full ownership of on December 1, 2025, only since that date. Shipments to outside customers, which leave out steel passed between the company's own units, actually fell 1.8%. As in Q2, price did the work: steel's external sales rose 23% on a 25% higher price and slightly lower external volume.

Steel fabrication. This segment makes steel joists and deck for the frames of non-residential buildings. Operating income rose to $90.6 million from $84.6 million in Q2, as shipments rose 18% from Q2 (and 25% from a year ago) to 190,151 tons. It is still 15% below a year ago, because the steel it buys has become more expensive. Its average price of $2,462 a ton is 1.3% lower than a year ago, though $20 higher than in Q2. Year to date, fabrication operating income is $265 million against $317 million, which the release attributes to "higher raw material input costs." The order backlog is 50% higher than a year ago and extends into Q2 2027, led by commercial construction, manufacturing, warehouses, data centers and healthcare.

Metals recycling. Operating income fell to $33.0 million from $47.8 million in Q2 "based on lower ferrous scrap pricing and metal spread contraction." Realized ferrous scrap prices fell $15 per gross ton from Q2. Most of the scrap this segment sells goes to the company's own steel mills, so cheaper scrap hurts this segment and helps steel. Nonferrous shipments (copper, aluminum and other non-iron metals) were 17% lower than a year ago.

Aluminum. The new aluminum flat-rolled mill in Columbus, Mississippi lost $26.2 million, 21% less than in Q2, and the company says the platform was EBITDA breakeven for the quarter. Shipments were 55,000 metric tons, against 53,000 in Q2, so volume barely moved. Management explains that volumes "were less than expected over a number of weeks, as yield losses increased at higher operating speeds due to quality impacts." Yield is the share of metal that ends up as sellable product. The cause was the composition of the hot strip mill's rolling coolant, which has since been changed, and the company says "mill performance has been excellent in October." All three cold mills are running. The first of two automotive finishing lines (the CASH lines) is operating and expected to ship finished automotive products before year-end, and the second is expected early in Q1 2027. Aluminum sales to outside customers were $476 million, slightly below Q2's $498 million.

What the headline numbers hide

• The company missed its own guidance. The September 17 guidance of $5.34–$5.38 came less than two weeks before quarter-end. EPS of $5.26 is 8 cents below the low end. The release does not mention the guidance or explain the gap. The only operating shortfall it describes is the aluminum yield problem, which it says lasted "a number of weeks." So aluminum is the likely cause, but the company has not said so.
• Cash conversion improved sharply this quarter but is still behind earnings for the year. Q3 operating cash flow of $846 million was 1.12 times net income. In Q3, receivables (money customers owe) stopped growing, using just $3.5 million of cash, but inventories absorbed $294 million. Over nine months, operating cash flow is $1.42 billion against $1.69 billion of net income (0.84 times). The gap is mostly a $764 million build in receivables. Higher steel prices mean each ton sold leaves more money owed at quarter-end. Receivables stand at $2.45 billion, up 45% since December 31.
• Little of the EPS growth came from financial engineering, and two items below the operating line were headwinds. Diluted shares fell 2.7% on buybacks, which explains roughly 5 points of the 92% EPS increase. Net income rose 87% on its own. Interest expense nearly tripled to $39.3 million from $13.6 million. Most of that reflects the end of capitalized interest on the aluminum mill: while the mill was being built, the interest on money borrowed for it was added to the project's cost instead of being charged against profit, as the Q2 10-Q explained. The effective tax rate rose to 22.8% from 21.4%. Operating income almost doubled (+98%), which is a cleaner measure of the improvement than EPS.
• GAAP vs adjusted. The gap is small this quarter. Adjusted EBITDA ($1,190 million) differs from plain EBITDA ($1,184 million) only by an $8 million unrealized derivative gain, which is subtracted, and $14 million of stock compensation, which is added back. There is no impairment this quarter. Q2's $16 million aluminum-related impairment means year-to-date GAAP figures include one non-cash charge.
• Employee profit sharing is taking a bigger cut. Profit-sharing expense rose 92% to $81 million, in line with pretax income (+90%). It is by design, but it means each extra dollar of steel spread does not all reach shareholders.

Did last time's read hold up?

Our Q2 2026 report said the September guidance implied "spreads are still widening, because selling prices are rising while scrap is getting cheaper," and listed what management expected segment by segment. Most of it happened. Steel was "significantly higher" ($1,033 million against $721 million), recycling fell, fabrication improved modestly, and the scrap cost dropped $8 a ton while the selling price rose $102. Aluminum improved but not "meaningfully" in volume terms: shipments rose only about 2,000 tons, because of the yield problem. The overall EPS result also fell short of the guided range. We also flagged that the shipment record mostly reflected the New Process Steel acquisition rather than more mill output. That is still true: mill production rose 0.7% and external shipments fell.

Takeaway: Q3 was Steel Dynamics' most profitable quarter of 2026 so far, and nearly all of it came from a widening gap between the price of steel ($1,400 a ton) and the cost of scrap ($404 a ton), not from selling more. The company's own mills shipped slightly less flat-rolled steel than a year ago. Results are therefore highly sensitive to that gap, which management ties to low imports after trade actions and to low customer inventories, two conditions that can change quickly.

Outlook

What management says. The release gives no numerical Q4 guidance. The company usually issues a mid-quarter EPS range, as it did on September 17 for Q3. Its qualitative outlook is that steel demand stays healthy on infrastructure, manufacturing, energy and data-center spending, "combined with a supportive U.S. trade environment and reduced unfairly traded import competition." It acknowledges that "additional domestic steelmaking and aluminum capacity may enter the market in the coming years." For aluminum, it expects volumes and profitability "to improve in the fourth quarter 2026 and throughout 2027, as startup costs subside, utilization and yields improve, and scrap content increases."

Our view. Q4 is often a seasonally softer quarter for construction-linked steel, and the release offers no evidence on whether the Q3 price momentum continued into October beyond calling the market strong. Three things to watch:

1. Any mid-quarter Q4 guidance, if the company issues one as it did for Q3: whether the selling price holds near $1,400 a ton.
2. Aluminum's first quarter of positive EBITDA. The company says October ran well after the coolant fix. Automotive shipments from the first CASH line before year-end would be the evidence.
3. Trade policy. The release explicitly links part of the coated-steel spread gain to "recent trade actions." That support can be reversed by executive action.

The balance sheet is not a constraint. Liquidity rose to $2.4 billion from $2.0 billion at the end of Q2, after $276 million of buybacks and $76 million of dividends in the quarter, and long-term debt is roughly flat since December at $4.2 billion. The quarterly dividend is $0.53. The risk is the one we noted last quarter: if steel prices fall back toward 2025 levels while scrap holds, a large part of the earnings gain goes with them. Aluminum and fabrication are improving but are not yet big enough to offset that.

Source: Steel Dynamics Q3 2026 earnings release (Exhibit 99.1 to Form 8-K filed October 20, 2026). The Form 10-Q for the quarter ended September 30, 2026 had not been filed at the time of writing.