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A Look at Analysts’ Top 5 US Steel Stocks

Mohit Oberoi, CFA - Author

Dec. 16 2019, Updated 12:41 p.m. ET

In this overview article, we’ll see how analysts are rating the leading steel stocks. For this analysis, we’ll use companies that are headquartered in the United States. Before we see how analysts are rating steel producers, let’s take a look at the top five US-based steel companies according to the latest production numbers.

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The top five steel stocks in the US

  • Nucor (NUE) is the largest US-based steelmaker. The company shipped 6.6 million tons of steel to outside customers in Q3 of 2019, a year-over-year fall of 6.9%. Nucor is ranked 12th among the global steel producers, according to 2018 production data from the World Steel Association.
  • S. Steel (X) is the second-largest US-based steel producer. It shipped 3.6 million tons of steel to outside customers in Q3 of 2019, compared to 3.9 million tons in Q3 of 2018. These shipments also include its Europe shipments.
  • Steel Dynamics (STLD) is the third-largest US steelmaker, based on Q3 of 2019 steel shipments. It shipped 2.4 million tons of steel to outside customers in Q3 of 2019, versus 2.5 million tons in Q3 of 2018.
  • Commercial Metals Company’s (CMC) shipped 2.1 million tons of steel in fiscal Q4 of 2019. Note that the company’s financial year runs from July to August. These shipments include its America Mills, America Fabrication, and International Mills operations.
  • AK Steel (AKS) shipped 3 million tons of flat-rolled steel to outside customers in Q3 of 2019, making it the fifth-largest US steel producer. Its steel shipments fell 8.5% from Q3 of 2018. And earlier this month, Cleveland-Cliffs (CLF) announced that it would acquire AK Steel. Check out CLF Buys AK Steel: A Win-Win Transaction? to learn more about the deal.

Analysts’ ratings tell us what Wall Street expects from a particular company. In the analysis below, we’ll see which steel companies have favorable Wall Street ratings. Let’s begin by looking at the steel stock with the most “buy” recommendations.

Top-five-rated steel stocks: Nucor leads the charts

Nucor, the largest US-based steel producer, has the highest percentage of “buy” or higher recommendations in our select group of steel stocks. The stock has a “strong buy” rating from three analysts, while seven analysts have a “buy” rating on Nucor stock. Overall, 67% of analysts have a “buy” or higher rating for Nucor. The remaining four analysts have a “hold” rating on the stock.

Also, Nucor stock has gained 11.5% year-to-date. The stock’s price target represents potential upside of 3.4% over the current stock price.

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Nucor is the lone US steel company among the top 20 global steelmakers. The decline in US steel companies’ global rankings is commensurate with the country’s position in the global steel industry. See Your Guide to the Top 10 in the Global Steel Industry for an overview of top steel-producing countries.

Generally, Nucor has been analysts’ top pick in the US steel industry. The company’s strong balance sheet, coupled with relatively stable profit margins, make it a top pick for analysts. But readers should note that Steel Dynamics has also emerged as an analyst favorite, all-season steel stock.

Steel Dynamics, the second-highest-rated US steel stock

Steel Dynamics is the second-highest-rated steel stock, according to analysts’ latest recommendations. Seven analysts have given the stock a “buy” or higher rating. And the remaining seven analysts have a “hold” or equivalent rating for the stock. No Wall Street analysts rate STLD as a “sell” right now.

Steel Dynamics has received a mean consensus price target of $34.64 from 14 analysts polled by Thomson Reuters on December 13. Based on that day’s closing prices, this target represents potential downside of 0.12%.

Steel Dynamics has risen 18.1% this year, and it’s slightly underperforming the Dow Jones Index. Like other steel companies, most of Steel Dynamics’ gains didn’t happen until the fourth quarter.

Wall Street has been generally bearish on US steel stocks this year. However, steel stocks have been strong in Q4. Check out Is the US Steel Industry Finally ‘Thriving’ This Month? for more analysis.

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Commercial Metals Company

Based on analysts’ ratings, Commercial Metals Company (CMC) is the ranked third among the five US steelmakers we’re covering in this overview article. The stock has received a “strong buy” rating from one analyst while five analysts have given it a “buy” rating. Overall, 50% of analysts polled by Thomson Reuters on December 13 have given Commercial Metals Company a “buy” or higher rating. And 8% of analysts have a “sell” rating for CMC while the remaining 42% of analysts have given the stock a “hold” or equivalent rating.

CMC has outperformed the broader steel space this year and is up 42.0% so far. Based on year-to-date returns, CMC ranks second. With more than 51% returns, AK Steel is the top performer this year.

Commercial Metals Company carries a mean consensus price target of $23.25, which represents 4.9% upside over its current market price. Based on analysts’ estimates, CMC has the highest upside potential among the steel stocks we’re comparing in this article.

AK Steel’s ratings

All 11 analysts covering AK Steel have a “hold” rating on the stock. Also, the stock’s mean consensus price target represents a potential downside of 23.0%.

AK Steel is the top-performing steel stock, based on 2019 price action. The stock has risen almost 25% in December so far after Cleveland-Cliffs (CLF) announced that it would acquire the company at a premium. See CLF Acquires AKS: A Match Made in Heaven? for the transaction’s strategic rationale. And while CLF stock fell after the announcement, it has also recouped these losses.

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U.S. Steel, the lowest-rated US steel stock currently

It’s worth noting that U.S. Steel accounted for 67% of the total steel produced in the United States in its first year of full operation, making it the largest steelmaker in the world. But now, the company is nowhere near its iconic past.

U.S. Steel was ranked 26th among global steelmakers, based on 2018 tonnage, according to the World Steel Association. But the company’s ranking among global steel producers has gradually slipped. In 2016, the company was the 24th-largest global steel producer. And while the company restarted two US blast furnaces last year, this year, it has curtailed production at two US blast furnaces and one Europe blast furnace amid the fall in steel prices. It’s currently the second-largest US steel producer.

Wall Street analysts weigh in on U.S. Steel stock

Wall Street sentiment is also quite bearish for U.S. Steel stock. Based on analysts’ ratings, it’s the lowest-ranked stock among the companies we’ve looked at in this article. Looking at current analyst ratings, you’ll find that none of the analysts surveyed by Thomson Reuters have given it a “buy” or equivalent rating. Meanwhile, ten analysts have given it a “hold” rating while the remaining six analysts have given X a “sell” or equivalent rating.

The stock’s mean consensus price target of $9.96 represents a potential downside of 27.4%. But despite analysts’ pessimism, X has been quite strong in the fourth quarter this year. It’s up 19.1% so far. However, year-to-date, the stock is still down 23.8%. Take a look at Why US Steel Short Sellers Might Lose on Their Bets for more steel-sector insights.

Originally published on October 3, 2017, this post was last updated on December 16, 2019.


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