Steel companies gain as BMO starts coverage

BMO initiates coverage of steel companies (SLX) Nucor (NUE +2.7%), Commercial Metals (CMC +2.3%), U.S. Steel (X +2.6%) and Steel Dynamics (STLD +0.9%).

NUE, started at Outperform with a $54 price target, is arguably the best of breed, with the highest margins in the group and best balance sheet; it also has best execution and benefits from growing low-cost DRI production.

CMC also is initiated at Outperform; it trades at the lowest valuation in the steel sector based on adjusted EV/EBITDA, dividend yield and free cash flow yield, and is leveraged to non-residential construction expected to improve over the next one or two years.

X is started at Market Perform; its balance sheet is by far the most stretched of the group at 5x net debt to EBITDA for FY2013, and there is potential for dilution from an out-of-the-money convertible bond due in 2014.

Earlier: STLD is started at Market Perform.

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Comments (1)
  • HackFab
    , contributor
    Comments (1279) | Send Message
    Sold 1/3 of my NUE position when it hit $50. I was a bit overweighted in it, so it was time to take some money off the table.
    18 Sep 2013, 06:58 PM Reply Like
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