Stifel Adjusts TP & Comments.Stifel analyst Ian Gillies thinks it’s a “complex” time for steel stocks with near-term performance appearing “biased lower for the well known issues stemming the UAW strike.”
“We cannot help but think that this is an opportune time to zag against the crowd,” he added. “The strike will inevitably end and demand will return from the auto producers. Moreover, there may be a sharp steel demand pick up to try to make up for lost volumes. This will overlay structural demand benefits from IIJA/IRA spending and onshoring trends which are expected to add 5.5-8.5 mmstpa of demand. Lastly, balance sheets are very healthy so near-term earnings compression will not have a material negative impact. Our preferred vehicles to play this trend are Algoma (for torque) and
RUS (for a safer play), as they should be able to dodge the near-term wrench.” In a research note released Monday, Mr. Gillies updated his 2023 and 2024 forecasts for steel companies, leading to a pair of target price adjustments:
Russel Metals Inc. (RUS-T -2.64%decrease
) to $45.50 from $44.50 with a “buy” rating. The average is $43.06.
“We rate Russel Metals as Buy given its strong balance sheet and attractive valuation,” he said. “The company’s Energy Products segment should also see improvements given the recovery being experienced in the North American energy sector. The company’s significant cash position should also allow it to execute an active M&A strategy.”