IPSCO Inc: Analysts Update Takeout Valuations

Shares of IPSCO Inc. (IPS) jumped more than 9% on Thursday after U.S. Steel Corp. (X) announced it would acquire tubular manufacturer Lone Star Technologies Inc. (LSS).

As a result, analysts are updating their takeout valuations for IPSCO on expectations of continued consolidation in the North American steel industry.

Desjardins Securities introduced a share price target of C$185 per share and reiterated its ‘buy’ recommendation.

While this takeout valuation is high, admits analyst John Hughes, it remains in line with the multiples currently affording to comparable North American steel producers.

IPSCO closed at C$150.80 on Thursday.

RBC Capital Markets’ Marie Millien hiked her implied takeout valuation for IPSCO to US$171 from US$152 and has an ‘outperform’ rating on the stock.

Her 12-month price target moves to US$138 from US$133 in order to reflect “higher steel markets valuation levels and the increase potential for a reorganization IPSCO,” she said in a note to clients.

However, given that the stock has gained 29% in the past month, Ms. Millien expects it could pause in the near term.

IPS 1-yr chart: