Steel recycling and products make Schnitzer Steel NASDAQ: SCHN
stock has been in a chopping range between $35 to $57 for over a year despite improving fundamentals. Growth is being driven by rising commodity prices
for ferrous and non-ferrous recycled metals and all-time highs for finished steel. Ferrous metals contain iron with magnetic properties including steel and cast iron and its alloys like stainless steel, carbon steel, cast iron, and wrought iron. Non-ferrous metals
don’t contain iron like aluminum, copper, zinc, nickel, tin, titanium, bronze and alloys like bronze and brass. The Company continues to invest in advanced metal recovery technology at its major recycling operations. Schnitzer launched its GRN Steel, which are net zero carbon
products enable the Company to meet its sustainability targets making this both an ESG
and commodities inflation
play. Despite global supply chain disruption, demand remains high. Prudent investors seeking exposure in the steel segment can watch for opportunistic pullback levels in shares of Schnitzer Steel.
Q2 Fiscal 2022 Earnings Release
On Apr. 6, 2022, Schnitzer Steel released its fiscal second-quarter 2022 results for the quarter ending February 2022. The Company reported an earnings-per-share (EPS) profit of $1.38 excluding non-recurring items matching consensus analyst estimates for $1.38. Revenues rose 30.5% year-over-year (YoY) to $783.2 million beating analyst estimates for $779.39 million. Ferrous and non-ferrous sales volumes rose 10% and 8%, respectively. Schnitzer CEO Tamara Lundgren commented, “After delivering record first-quarter results, our second-quarter performance continued the trend of strong financial and operating performance leading to first-half results that were the highest in our Company’s 116-year history. We continued to invest in the rollout of our new advanced metal recovery technology at our major recycling operations and returned capital to our shareholders through both our dividend and share repurchases while delivering positive operating cash flow.”
Conference Call Takeaways
CEO Lundgren reiterated sustainability is at the core of what they do since 1906. Ethisphere named Schnitzer Steel as one of the World’s Most Ethical Companies for eight years straight. Corporate Knights ranked Schnitzer Steel number 15 out their Global 100 list of the world’s most sustainable companies and specifically highlighting its role in the worldwide movement towards a lower carbon future. CEO Lungren transitioned this to the rollout of its zero carbon emission GRN Steel being produced out of its Oregon-based Cascade steel mill. This mill utilizes carbon-free hydroelectricity to create low carbon steel products. The worldwide demand for recycled metals drove growth in the quarter in addition to rising commodity pricing. The October acquisition Columbus Recycling assets helped contribute to the quarter. Schnitzer bought back 200,000 shares of stock in the quarter and delivered its 112th consecutive dividend. The Company felt the pressures from global supply chain disruptions, but demand remains very high as they expect strong results for fiscal Q3 2022 driven by higher sales volumes and strong pricing trends. CEO Lundgren added, “Demand for long products continues to rise during the quarter with prices reaching their highest levels on record primarily driven by increases in construction spending. Since the end of the second quarter, we've seen a sharp increase in ferrous pricing driven by the lack of semi-finished and pit-up iron exports from Ukraine and Russia. Supply flows are strong, supported by higher prices, spring weather, increased industrial activity, and slightly better trucking availability.” The continued pent up demand for autos, and appliances without a recovery of supply is driving up prices in addition to the underinvestment in industrial mining and metal production. The global decarbonization efforts is a powerful driver for the demand for recycled metals.
SCHN Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provide a precision view of the price action playing field for SCHN stock. The weekly rifle chart initially peaked near the $56.25 Fibonacci (fib) level. The weekly uptrend has a rising 5-period moving average (MA) at $51.05 with a weekly 50-period MA just below at $49.30 followed by the weekly 15-period MA support at $46.08. The weekly lower Bollinger Bands (BBs) sit at $33.32. The weekly stochastic made a full oscillation back up towards the 80-band as it stalls. The weekly market structure low (MSL) buy triggered on the breakout back up through $40.48. The daily rifle chart is starting to breakdown with a flat 5-period MA at $51.04 that crossed down through the 15-period MA at $51.81. The daily 200-period MA support sits at $48.42 and daily 50-period MA support is rising at $46.44. The daily lower BBs sit near the $44.14 fib level. Prudent investors can watch for opportunistic pullbacks at the $50.11 fib, $48.74 fib, $45.86 fib, $44.14 fib, $42.19 fib, and the $37.55 fib level. Upside trajectories range from the $59.34 fib level up towards the $70.28 fib level.
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