KeyBanc On Steel Stocks: Take Profits In Your Outsized Gains

Offering its take on the steel sector — comprising carbon-sheet mills, carbon sheet distributors and raw material suppliers — KeyBanc Capital Markets said in a note it maintains its selective view on carbon sector equities. 

U.S. sheet supply-demand momentum appears more balanced into 2018, supporting improvements in pricing and demand into the first quarter of 2018, said analyst Philip Gibbs. 

See also: Analyst Surveys Suggest Steel Stocks Will Soon Suffer

Steel Dynamics' Discounted Valuation Liked

Among the individual stocks, Gibbs said he likes Steel Dynamics, Inc. STLD's relative sector discount on 2018 expectations. The discount comes despite the company's industry-leading return on invested capital, or ROIC, and organic and inorganic catalysts, the analyst said. (See Gibbs' track record here.)  

Reliance Steel Sparkles On Execution

Additionally, Gibbs said he likes  Reliance Steel & Aluminum Co RS's strong third-quarter execution. KeyBanc raised its forward estimates for the company.

Neutral On Ryerson Holding>

The firm downgraded shares of Ryerson Holding Corp RYI from Overweight to Sector Weight, with the action blamed on its downgraded view of competitive FIFO gross margin environment in the distributor segment for 2018. The firm also sees operating margin pressure and lower-than-expected FCFE generation.

The firm reduced its estimates for Ryerson Holding, Olympic Steel, Inc. ZEUS and Worthington Industries, Inc. WOR.

Rating

• Ryerson Holding Corp. – Downgraded from Overweight to Sector Weight

• Steel Dynamics, Inc. – Overweight/$44

• Reliance Steel & Aluminum Co – Overweight/$81

• AK Steel Holding Corporation AKS - Sector Weight

• Cleveland-Cliffs Inc CLF - Sector Weight

• Nucor Corporation NUE - Sector Weight

• Olympic Steel, Inc. - Sector Weight

• United States Steel Corporation X - Sector Weight

• Worthington Industries, Inc. - Sector Weight

The Price Action

• Ryerson Holding – down 1.65 percent at $8.95.

• Steel Dynamics – Down 0.61 percent at $37.49. 

• Reliance Steel & Aluminum – Down 0.60 percent at $75.81. 

• AK Steel Holding – Closed at $4.88. 

• Cleveland-Cliffs Inc – Up 3.61 percent at $6.61. 

• Nucor Corporation – Down 0.39 percent at $55.93. 

• Olympic Steel – Down 2.31 percent at $19.41.

• United States Steel – Up 2.46 percent at $29.21. 

• Worthington Industries – Up 0.99 percent at $40.89. 

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