Dec. 17, 2013, 12:39 PM
- Nucor’s (NUE -2%) downside Q4 guidance mostly reflects its losing side bet on natural gas, and Citigroup’s Brian Yu thinks the guidance has positive implications for sheet producers AK Steel (AKS +2%), U.S. Steel (X +0.5%) and Steel Dynamics (STLD -0.4%).
- NUE noted improved profitability from its sheet unit, despite the three-week planned outage at the Berkeley County mill, due to a series of price hikes; also, bar and structural mills saw weaker performance due to planned outages for upgrades at the SBQ mill in Norfolk and structural mill in Blytheville.
Dec. 13, 2013, 11:41 AM
- U.S. Steel (X +2.8%) and ArcelorMittal (MT +1.2%) are upgraded to Outperform from Market Perform at Cowen, which prefers the most vertically integrated steel companies to insulate against rising raw material costs.
- Strengthening demand and an accelerating global economic recovery should enable producers with excess capacity to capture latent earnings, the firm says, but non-vertically integrated mills likely will face a margin squeeze from elevated iron ore prices.
Dec. 11, 2013, 12:31 PM
- U.S. Steel (X -1.7%) has edged lower since Morgan Stanley went against the grain with its upgrade a month ago, so the firm is out defending its optimistic view.
- On skepticism over X's cost cutting program, the firm believes management was right when it decided to not set a concrete cost savings target; as a result, the firm thinks each individual cost savings announcement over the coming year will be its own incremental positive catalyst, and the dispersion of announcements will make life more difficult and less predictable for short sellers.
- The firm also says the impact of lower iron ore prices will be more than offset by improvements to earnings power from Project Carnegie cost savings, fixed cost absorption, and enhanced pricing power as operating rates rise.
Nov. 27, 2013, 4:59 PM
Nov. 22, 2013, 9:35 AM
- U.S. Steel (X -2.2%) and Nucor (NUE -2.3%) open lower after receiving downgrades from Wells Fargo; X is cut to Underperform with a $17-$21 target range, as the firm thinks shares have been rewarded prematurely on cost-cutting measures, while NUE is dropped to Market Perform and a $50-$55 price target due mostly to valuation.
- Steel stocks have enjoyed an impressive move thanks to a recovery in sheet prices, but the firm believes upside to near-term earnings estimates is expected and the long trade likely will die once companies positively pre-announce results in December, and expects pricing to weaken meaningfully in H1 2014 due to increasing levels of import competition.
Nov. 18, 2013, 3:44 PM
- The recent jump in U.S. Steel (X) and AK Steel (AKS) has more to do with multiple expansion and short covering than actual improvements in their businesses, J.P. Morgan says in seeing downside ahead for the two stocks.
- Some of the drivers that have helped steel prices since June appear to be running out of steam and could start to weigh on the market, the firm says; domestic steel mill supply could increase as H2 2013 outages are nearing an end, and foreign supply into the U.S. market could increase with higher imports as U.S. steel price premiums over Chinese prices are nearing a high.
- Given its increasingly cautious stance on steel price, the firm prefers Nucor (NUE) and Steel Dynamics (STLD) given their variable cost structures and significant leverage to an eventual recovery in non-residential construction.
Nov. 13, 2013, 8:31 AM
- U.S. Steel (X) is upgraded to Overweight from Equal Weight at Morgan Stanley, which hikes its target price to a Street-high $35 with a bull case target of $55.
- The firm says it is now confident that the management team is taking a "transformational" approach to cost cutting, and it expects improving U.S. supply conditions and a modest ~4% demand pickup.
- Stanley's 2014 EPS estimate of $3 is far above the $1.03 consensus.
- The firm also cuts Nucor (NUE) to Equal Weight from Overweight, believing positive U.S. steel industry trends are mostly priced in, and raises its price target for Steel Dynamics (STLD) to $21 from $19.
- U.S. Steel +1.9% premarket.
Nov. 4, 2013, 2:41 PM
- Axiom Capital analyst Gordon Johnson responds with a big “huh?” to Goldman Sachs' U.S. Steel (X +4.3%) upgrade, especially as it relates to oil country tubular goods.
- "As demand improves through continued recovery in auto and industrial markets, and new OCTG capacities under construction in the U.S. begin to ramp up," Goldman's Sal Tharani and Chelsea Bolton see "market improvement in flat rolled steel demand making this market tight in the coming months, from over-supplied just a few months ago."
- Axiom's Johnson finds the argument "perplexing... One of [US Steel's] largest earnings contributors is its OCTG segment. The GS report argues that more OCTG capacity will create more OCTG demand. Huh? Rig counts create demand, not the build-out of OCTG capacity... Further, if more OCTG capacity is built, this is be a negative for X’s most profitable segment."
- Goldman had upgraded U.S. Steel, AK Steel (AKS +9.5%) and Steel Dynamics (STLD +2%) to Buy.
Nov. 4, 2013, 8:26 AM
- Shares of U.S. Steel (X), AK Steel (AKS) and Steel Dymanics (STLD) surge premarket after Goldman Sachs raises its view on the steel sector to Neutral and upgrade the shares of the individual steelmakers to Buy.
- Although volatility in the cyclical steel sector will remain the norm, risks associated with oversupply are priced in and "investors should start to look beyond near-term headwinds," the firm says.
- Supply-demand fundamentals for steel are starting to look more appealing, particularly for flat steel, while the firm's "very bearish" view on input costs (iron ore) bodes well for steel producers in the long run; also, recently filed trade cases, if successful, could help.
- Reliance Steel (RS) is cut to Neutral from Buy based on valuation.
- X +3.9%, AKS +7.1%, STLD +3%.
Oct. 30, 2013, 12:57 PM
- U.S. Steel (X -3.8%) is downgraded to Hold from Buy with a $26 target price at Deutsche Bank after Q3 earnings beat estimates but the outlook was weaker while the steel market trends above forecast.
- Early corporate initiatives announced are a positive, but the firm believes these and further cost initiatives are understood or priced-in.
- The firm says it's a difficult time of year to downgrade but current steel prices aren't sustainable and again are priced-in; X trades at 7x estimated 2014 EBITDA while supply issues persist and inflation has eased.
Oct. 29, 2013, 5:36 PM
- U.S. Steel (X) shares turned from a loser into a big winner in the final hour of trading, after CEO Mario Longhi said in the earnings call the company will permanently shut down iron and steelmaking operations at its Hamilton, Ontario mill at the end of this year; coke-making and steel finishing operations will not be affected.
- X will take a non-cash charge of ~$225M in Q4 connected with the closure.
- Shares jumped on the news, closing up 8.7%.
Oct. 29, 2013, 11:23 AM
Oct. 29, 2013, 7:57 AM
- U.S. Steel (X) -2.6% premarket after reporting an unadjusted Q3 loss, due in part to a $1.8B after-tax goodwill impairment charge related to a writedown in the value of two of its North American units.
- Excluding the charge, X's adjusted loss wasn't as bad as analysts expected, but revenues fell 11% to $4.13B, nearly $200M short of estimates, and shipments also slipped 11% Y/Y.
- The $12.24/share goodwill impairment charge was blamed on the prolonged slump in steel prices due to overcapacity and the weak global economy.
- Income from the flat-rolled segment, by far the biggest unit by shipments, rose to $82M from $29M a year ago.
- Expects Q4 operating income will decrease due to planned maintenance outages in the flat-rolled segment, but the European segment should return to profitability from a $32M loss.
Oct. 29, 2013, 5:49 AM
Oct. 22, 2013, 9:53 AM
- UBS steel analysts are cautiously optimistic on a return to growth for the steel industry (SLX), believing steel demand is heating up and the auto and manufacturing sectors can drive growth forward.
- UBS actually sees steel prices falling next year, but producers that have lowered costs and restructured are poised to perform well; the firm likes Nucor (NUE +0.4%) and Steel Dynamics (STLD +0.3%) as stocks to buy.
- However, higher fixed and legacy type costs will have a severe impact on other well-known names in the sector; the firm downgrades U.S. Steel (X -0.8%) and Reliance Steel (RS -0.1%) to Neutral while AK Steel (AKS +0.2%) and ArcelorMittal (MT -1%) are cut to Sell due to deteriorating fundamentals.
Oct. 21, 2013, 11:59 AM
- The market is showing little response to U.S. Steel's (X -0.2%) surprising $1.8B writedown, a big sum for a company with a total market cap of ~$3.5B.
- Analysts think the writedown suggests the company thinks rising costs could be a problem and that its auto and energy customers are going to pay lower prices, squeezing profits.
- The news also is a sign X is willing to take some short-term hits for its long-term health, in keeping with new CEO Mario Longhi's cost-cutting program; the market is impressed with the new man, and U.S. Steel’s stock price has jumped more than 30% since he took over in early September.
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