- Steel stocks seem oversold and their valuations compelling but they lack positive near-term catalysts to drive share prices higher, Morgan Stanley (NYSE:MS) analyst Piyush Sood says.
- Sood raises his near-term steel price forecasts to reflect current market strength but expects prices to turn lower over the summer as import volumes start to increase due to Section 232 exemptions and exclusions.
- Nucor (NYSE:NUE), U.S. Steel (NYSE:X) and Steel Dynamics (NASDAQ:STLD) seem to price in hot rolled coil prices at $625-$675/ton vs. spot prices of ~$880/ton, Sood says, adding that prices will struggle to fall through the $700/ton level given the strength of global commodity prices.
- Meanwhile, Cowen's Novid Rassouli sees fundamental support for steel prices and expects steel shares to rise as prices remain elevated; Q1 steel sector earnings likely will come in broadly in line, with benefits from rising steel prices starting in Q2.
- ETF: SLX
- Source: Bloomberg First Word
- Now read: Why Every Investor Should Analyze Free Cash Flow
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