Recent Posts

Steeling The Signals: December Update

Broad-based indications of strength are evident throughout the steel channels and there appears to be increasing probability of upward movement in spot market prices (looking out 3-4 quarters). The contact narrative shifted to the unusual carbon sheet and plate supply constraints, heading into a normally seasonal-slow demand period, and future production deficit anxieties.
Nucor Corporation (NUE) issued earnings outlook that may be considered disappointing by The Street. Management provided a 4Q20 EPS guidance range of $1.02-1.07. The language within this morning’s release regarding Steel Mill trends aligns with the feedback collected from our checks. We also heard from Steel Dynamics (STLD) today, which issued an adjusted 4Q20 guidance range of $0.80-0.84, beating expectations. Continue reading

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12:43 PM

Steel Dynamics (STLD): The Opposite of SteelMageddon – Raising Estimates and Target Price

What is the opposite of Steelmageddon? Whatever word just popped into your head is probably the best way to describe current domestic steel industry fundamentals. Following a closer look at the drivers behind the carbon flat rolled markets, and communicating with several channel contacts, we decided to increase our carbon sheet price forecasts and the estimates on STLD. Continue reading

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9:52 AM

Reliance Steel & Alum (RS): One Of The Names That Could Really Surprise To The Upside Next Week

We like the set-up for Reliance Steel & Aluminum Co (RS) heading into next week’s earnings report and reiterate our OUTPERFORM recommendation on the shares. After reviewing all key portfolio drivers, we see very high probability of a 3Q20 earnings beat (and favorable guidance) primarily driven by ferrous and nonferrous metals pricing strength, healthy shipment levels, a tolling recovery, and improved cost position. Continue reading

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6:23 AM

Nucor Corporation (NUE): Solid 3Q Guidance Without Much Help From Carbon Sheet Or Plate

Nucor Corporation (NUE) kicked off the mini-earnings preview period by issuing a 3Q20 earnings outlook that crushed expectations. Yesterday, the management team offered an EPS guidance range of $0.50-0.55, considerably better than the $0.37 consensus forecast, citing continued strength in Downstream Product volumes/margins and better-than-expected carbon bar and beam mill shipments. Continue reading

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9:00 AM

Steel: Demand Strength Justifies Increase Attempt, But Supply Is Coming – Oh Dear…Born

There appears to be early support for the latest mill price increase attempt on carbon sheet. After reviewing some of the signals coming out of the steel channel this week, we expect at least one-half of the attempted +$40/ton spot adjustment to stick. For the first time since January, our survey is showing a real demand push, in addition to the modest customer sourcing panic developing in the MW region. Continue reading

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9:00 AM

Steel Dynamics (STLD): Sometimes Mixed Is Good – Upgrading The Shares To A Hold

We are upgrading the shares of Steel Dynamics (STLD) to a HOLD rating as the shares have surpassed our previously-issued twelve-month target price of $27, falling 16% since the early-June downgrade (to underperform). The aggressive trading reaction to carbon scrap price headlines released earlier in the week could be the “final shoe to drop” in the metals & mining space. Continue reading

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9:00 AM

Reliance Steel & Alum (RS): Initiating Coverage With An OUTPERFORM Rating

We are starting formal coverage on Reliance Steel & Aluminum (RS) with an OUTPERFORM recommendation and twelve-month target price of $101/share (suggesting roughly 9% upside versus Wednesday’s closing price). Against the backdrop of relatively cautious near-term expectations for the carbon steel group, driven by weak survey results and falling prices, we believe RS is positioned to meet or beat consensus expectations for CY20 on market share improvements, cost reduction efforts and early upward momentum for nonferrous metals. Continue reading

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9:00 AM

Steel: Mill Prices Are Falling; Lowering Forecasts On Excess Supply Risk

The carbon steel price retreat started a bit earlier than we expected. Mill quotes for the benchmark HRC product dropped below $500/ton, which should be considered another red flag for the steel mini-mills heading into the 2Q earnings reports. Against the backdrop of weak demand and the lack of buyer urgency, domestic producers are reacting to early restart(s) of previously-idled production capacity. The downturn in pricing seems to be more pronounced across the flat rolled categories. Continue reading

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9:06 AM

Nucor Corporation (NUE): Initiating Coverage With An UNDERPERFORM Rating

We are initiating coverage on the shares of Nucor Corporation (NUE) with an UNDERPERFORM recommendation and twelve-month target price of $38 (suggesting 11% downside versus the Friday close). Despite the better-than-expected mid-quarter guidance offered by the management team late last week, we are maintaining a cautious view on most of the companies positioned throughout the domestic carbon steel industry, including NUE. Continue reading

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9:00 AM

Steel Dynamics (STLD): A Dynamics In The Rust? Starting Coverage With An OUTPERFORM

Steel Dynamics (STLD) looks interesting at the current price level. In a world where almost everything can be described as weak, distressed, hitting new lows, unprecedented, or uber-bearish, we point to one of the most frequently-overlooked industrial companies in North America, distinctly advantaged versus its peers and protected by its balance sheet, in our view. Today, we are initiating coverage on the shares of STLD with an OUTPERFORM recommendation and a twelve-month target price of $28/share, staying focused on the compelling risk-versus-reward profile, long-term market share opportunities, near-term pricing tailwinds, and projected CapEx ROIs. Continue reading

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9:00 AM
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