Post by
retiredcf on Nov 01, 2023 9:48am
RBC
October 27, 2023
Connecting the Dots: SJ flash read-through – US steel producer results point to upcoming infra spend
TSX: SJ | CAD 71.95 | Outperform | Price Target CAD 77.00
Sentiment: Positive
Our take. US steel producers reported results this week and last, with commentary surrounding US infrastructure spending a key positive in our view for Stella-Jones. Steel Dynamics noted "political dysfunction has delayed the awarding of public monies likely into the first quarter of next year" and Nucor said "based on [its] current production and order books, it feels like we're still in the early innings across all three [steel megatrends]", resulting from the IIJA, IRA, and CHIPS act. What this means for Stella-Jones in our view is that the company's poles and ties businesses should begin to directly benefit from infrastructure spending early next year. Recall that SJ’s long-term guidance does not include any benefit from infrastructure spending; we therefore see potential upside to long-term targets as infrastructure funds begin to be spent. We will look for more color when Koppers reports Q3 results on November 3 and when Stella-Jones reports on November 7.
What happened? Select commentary from US steel producer reporting below:
• Steel Dynamics: "Though political dysfunction has delayed the awarding of public monies likely into the first quarter of next year, the infrastructure spending and fixed asset investment related to the IRA programs, along with the re-shoring of manufacturing, should provide momentum for additional construction spending through 2024, effectively extending the construction cycle."
• Nucor: "Investors have been asking where we are in the cycle of these megatrends, in what steel products Nucor is best positioned to supply? I'd like to share a few thoughts on that. And since it's baseball playoff season, I'll use a few baseball metaphors to help make my point ... based on current production and order books, it feels like we're still in the early innings across all three.
• Cleveland Cliffs: "Infrastructure is starting to pick up and things related to alternative clean sources of energy as well, particularly wind and solar"
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