U.S. Steel, Other Metals And Mining Reviewed By Barclays

Heading into the 2Q earnings season, commodity price estimates for steel have been raised. This has improved the earnings outlooks for steel companies, and resulted in an increase in the price targets of four steel stocks, Barclays’ Matthew J. Korn said in a report.

The performance of metal stocks has recently been strong, albeit highly volatile, with mixed macro data from China and uncertainly over the US interest rate policy. “Our sense is that investors are going into 2H pleased with metal companies' operations, anticipating upward estimate revisions, but still concerned with just how long current steel and copper prices can hold,” analyst Matthew Korn wrote.

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Updated Estimates And Price Targets

• AK Steel Holding Corporation AKS – Rating maintained at Equal-weight, while price target raised from $4 to $5. The EPS estimates for FY1 and FY2 have been raised from -$0.07 to $0.26 and from $0.23 to $0.54, respectively.
• Nucor Corporation NUE - Rating maintained at Overweight, while price target raised from $52 to $55. The EPS estimates for FY1 and FY2 have been raised from $1.98 to $2.81 and from $2.84 to $2.88, respectively.
• Steel Dynamics, Inc. STLD - Rating maintained at Overweight, while price target raised from $27 to $28. The EPS estimates for FY1 and FY2 have been raised from $1.55 to $2.01 and from $1.93 to $1.99, respectively.
• United States Steel Corporation X - Rating maintained at Equal-weight, while price target raised from $15 to $16. The EPS estimates for FY1 and FY2 have been raised from -$2.86 to -$1.01 and from -$0.03 to $0.57, respectively.

The price targets have been raised to reflect that domestic steel prices had held above $600 per ton. “Chinese steel prices have cycled up and down again, but in the U.S. reduced capacity, limited imports, and low inventories have kept sheet tags elevated,” Korn wrote.

The analyst expects HRC to decline about 13 percent to an average of $545 per ton over 2017. He added that there were “some early signs of softening from weaker scrap, shrinking lead times, and a recent step up in imports.”

Despite these factors, the mini-mills were gaining market share, achieving margin expansion, and growing via new projects and targeted M&A, Korn noted.

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