On May 14, U.S. President Donald Trump credited hit tariffs on imported steel with rebuilding the U.S. steel industry, which he said is now “booming.” However, shares of North Carolina steel producer Nucor Corporation (NYSE: NUE) are down 25.9 percent in the past year, and one analyst double downgraded the stock on Friday.
Bank of America analyst Timna Tanners downgraded Nucor from Buy to Underperform and lowered her price target from $68 to $50. Tanners also made the following price target changes to steel stocks under her coverage:
- AK Steel Holding Corporation (NYSE: AKS) reiterated at Underperform, target dropped from $1 to $1.
- Commercial Metals Company (NYSE: CMC) reiterated at Underperform, target dropped from $18 to $13.
- Reliance Steel & Aluminum Co (NYSE: RS) reiterated at Neutral, target dropped from $98 to $90.
- Steel Dynamics, Inc. (NASDAQ: STLD) reiterated at Buy, target dropped from $40 to $30.
- United States Steel Corporation (NYSE: X) reiterated at Underperform, target dropped from $12 to $8.
Tanners said Nucor will likely be one of the first victims of what she calls a “steelmageddon” supply glut that will persist through 2021. As a result of oversupply concerns, Bank of America cut its 2022 benchmark hot rolled coil steel price forecast from $590/ton to just $475/ton.
“Given a worse 2019E price view, risks of peak demand, and a looming supply glut in 2020-2021E, we see limited catalysts for the group and expect little incrementally positive from its June 20 investor day,” Tanners wrote in the note.
Tanners said the supply glut will hurt all U.S. steel companies, but Steel Dynamics will be most immune given its attractive valuation, strong balance sheet, and near-term expansion opportunities.
Nucor shares traded lower by 2.7 percent to $47.94 on Friday.
Bank Of America Gives US Steel A Double Downgrade As Steel Prices Soften
Latest Ratings for NUE
View More Analyst Ratings for NUE
View the Latest Analyst Ratings
See more from Benzinga
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.