Goldman: Not All Metal And Mining Stocks Are Created Equal

The ability of metal and mining companies to translate positive market conditions into healthy financial performance aren't universal, according to Goldman Sachs. 

The Analyst

• Analyst Matthew Korn upgraded Allegheny Technologies Inc ATI from Sell to Neutral and raised the stock’s price target from $26 to $29. 
• Korn downgraded AK Steel Holding Corp AKS from Neutral to Sell and lowered the price target from $6 to $4.

The Thesis

Downstream processors share exposure to positive trends in key end markets such as automotive, transportation and aerospace, Korn said in a note. (See the analyst's track record here.) 

Differentiation among downstream metals and steel stocks will determine how they perform in the face of these positive sector trends, the analyst said. 

“Both sets of stocks face positive market conditions underpinned by strong demand, but the ability of the companies to translate this into healthy financial results has been mixed."

Korn upgraded ATI and said he expects the company’s “consistent execution” to provide differentiation from peers, along with potential valuation upside.

“ATI’s demonstrated consistency in a growing but technologically challenging market is more rare than we had expected," the analyst said. 

Korn lifted out-year margin assumptions for the company in anticipation of “continued momentum." 

Conversely, AKS’ pricing and margin outlook continue to “undershoot expectations,” and the stock has underperformed other steel stocks in its peer group, Korn said. 

Even with new restrictions on imported steel, heightened competition in the automotive business could limit AKS' profitability, the analyst said.

Price Action

Allegheny Technologies shares were up 4.49 percent at the close Wednesday at $28.17. AK Steel was up 3.85 percent at $4.58. 

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