Buy Rating For Steel And Mining Companies

April 18, 2018

Goldman Sachs awards buy rating to 5 US steel and mining companies

Goldman Sachs has identified the North American Metals and Mining industry as one to watch for investors. In a research note written on March 19, analysts tipped shares in five mining companies, including Nucor Corp and Steel Dynamics, for growth and attractive investment returns.

Tariff Impact

The recommendation comes just a few weeks after US President Donald Trump declared his intention to impose punitive tariffs on steel and aluminium imports. In a move that surprised even his own advisors, Trump revealed a plan to introduce import tariffs of 25% on steel and 10% on aluminium, although the final tariffs are still being negotiated.

The Goldman note reads, ”Commodity prices are high, the supply side for metals and bulks looks more rational than it has been in years, [metals and mining] balance sheets are healthy (or at least healthier), and consumption has momentum from coordinated global growth, even as China gradually slow.”

Analyst Forecast

Analysts expect Nucor Corp to report a sales figure of $22.9 billion for the 2018 fiscal year according to data from FactSet Research Systems.

Nucor’s owners Cramer and AAP told subscribers in a note distributed March 16: “We expect Nucor’s earnings will continue to improve now that President Trump has imposed a 25% tariff on steel imports as this decree has leveled the playing field for the US industry.” Goldman has put a Buy rating on Nucor Corp stock with a price target of $78 and expects to see 17% upside.

The Indian based company Steel Dynamics has a Buy rating and price target of $59, with Goldman seeing the potential for 26% upside. Goldman’s note reads “Steel Dynamics’ steadily expanding profitability through pricing cycles, robust financial health, proven ability to leverage acquisitions and low operational risks are all positive attributes among the [metals and mining] sector, in our view.”

The other three companies singled out by Goldman for investment potential and upside are mining giant Freeport-McMoRan Inc., the steel manufacturing and scrap metal recycling company Schnitzer Steel Industries Inc. and aluminum processor Constellium N.V. In the note, Goldman awarded all three a Buy rating.