Analysts Have Different Views on US Steel Stocks in May

  • US steel stocks have recovered over the last month. Meanwhile, Wall Street analysts have different views of the sector after last month’s rally.
  • There are concerns about demand this year. Domestic mills have adjusted their production to reflect the new dynamics.

Analysts’ views on US steel stocks

US steel stocks have recovered from their 2020 lows in line with the broader markets. Looking at the second-quarter price action, U.S. Steel Corporation (NYSE:X), Nucor (NYSE:NUE), and Cleveland-Cliffs (NYSE:CLF) have risen 13.7%, 5.7%, and 5.5%, respectively. However, Steel Dynamics (NASDAQ:STLD) is trading flat this quarter. The metals and mining sector has been hit this year. End-users, especially the automobile sector, have curtailed production due to the COVID-19 pandemic.

In this article, we’ll discuss how Wall Street analysts view steel stocks this month. Notably, analysts’ target prices shouldn’t solely influence your investment decisions.

UBS gets bearish

UBS is bearish on the stocks. Last week, UBS lowered Steel Dynamic’s target price from $43 to $32 and Nucor’s target price from $56 to $39. UBS cut X’s target price from $7 to $4. The cut would mean a 44% downside for X stock based on last week’s closing prices.

While UBS is bearish on X stock, earlier in May, BMO raised its target price from $6 to $9. Citigroup raised its target price from $5.5 to $8. In March, X stock fell to its all-time lows.

KeyBanc is concerned about US steel demand

KeyBanc is concerned about weak demand recovery. Last week, KeyBanc downgraded Steel Dynamics to “sector weight” from “overweight.” KeyBank also lowered Nucor’s target price by $4 to $45. The demand for metals has taken a beating due to the pandemic. The automotive sector, which is the second-largest steel end-user, has curtailed production. The energy sector is in deep trouble due to the fall in energy prices.

However, domestic mills have adjusted production to reflect the new realities. US steel production has fallen 12.4% this year. X has curtailed some of its plants as US steel demand and prices fall due to the pandemic.

Outlook

Domestic mills announced price hikes, which helped prevent the slide in US steel prices. Scrap prices have also bounced back, which should support the domestic pricing environment. China has resumed business operations, which is positive for the broader metals and mining industry.