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Goldman Sachs Upgrades Steel Sector

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In a report published Monday, Goldman Sachs analyst Sal Tharani upgraded the coverage view for the steel sector form Cautious to Neutral based on optimism of steel demand.

Tharani noted that the supply demand for steel has gained appeal, especially for flat steel. The analyst further commented on iron ore costs, “our very bearish view on input costs (iron ore) bodes well for steel producers in the long run as we believe that mills should be able to expand margins as raw material prices descend.”

Goldman Sachs is optimistic on steel demand in “auto, energy, low US natural gas price induced demand from LNG, chemical and power sectors.” The analyst added that a new OCTG capacity in the US could also be a major source of demand for flat steel.

Upgrades:

  • Tharani upgraded United States Steel (NYSE: X) from Sell to Buy and increased the PT from $22 to $30 based on flat steel leverage and cost cutting. Shares rose 4.92 percent to create a new 52-week high of $27.05 after the upgrade.
  • Goldman Sachs upgraded AK Steel Holding (NYSE: AKS) from Sell to Buy and raised the PT from $3 to $6 as the analyst reported that the new iron ore strategy is not priced in and expects the company to see notable margin expansion. After the upgrade, shares rose 11.07 percent to $5.11.
  • Tharani upgraded Steel Dynamics (NASDAQ: STLD) from Neutral to Buy based on recovery in the non-residential construction market and the successful execution of the Mesabi Nugget project. The analyst increased the PT from $17 to $22. Steel Dynamics closed at 18.80 and is currently trading +1.95 percent

Downgrades:

  • Goldman Sachs downgraded Reliance Steel & Aluminum (NYSE: RS) from Buy to Neutral as Steel Dynamics has higher upside potential and RS “appears to be fully valued.” The analyst raised the PT from $80 to $82. RS closed at 74.40 on Friday.

Latest Ratings for X

DateFirmActionFromTo
May 2017Credit SuisseUpgradesNeutralOutperform
May 2017Cowen & Co.DowngradesOutperformMarket Perform
Apr 2017MacquarieDowngradesNeutralUnderperform

View More Analyst Ratings for X
View the Latest Analyst Ratings

Posted-In: Goldman Sachs Sal TharaniAnalyst Color Upgrades Downgrades Price Target Analyst Ratings

 

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