Goldman Raises Steel Sector to Neutral; AK Steel (AKS), US Steel (X), Steel Dynamics (STLD) Raised to Buy; Reliance Steel (RS) Cut to Netural

November 4, 2013 7:14 AM EST Send to a Friend
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Price: $4.42 -0.9%

Rating Summary:
    7 Buy, 11 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 15 | Down: 38 | New: 13
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Goldman Sachs upgraded the Steel Sector to Neutral from Cautious. Analyst Sal Tharani thinks risks associated with oversupply are priced in and he sees a sector recovery over the coming years.

"Although volatility associated with this deeply cyclical sector will remain a norm, we believe that investors should start to look beyond near-term headwinds," said Tharani.

"The supply-demand fundamentals for steel are starting to look more appealing, particularly for flat steel, as some supply has been taken out and demand drivers are firmly in place. Second, our very bearish view on input costs (iron ore) bodes well for steel producers in the long run as we believe that mills should be able to expand margins as raw material prices descend. And lastly, although not part of our base case scenario, recently filed trade cases, if successful, could provide some tailwind," he added.

AK Steel Holding Corporation (NYSE: AKS) was upgraded to Buy with a price target of $6.

United States Steel Corp. (NYSE: X) was upgraded to Buy with a price target of $30.

Steel Dynamics Inc. (Nasdaq: STLD) was upgraded to Buy with a price target of $22.

Reliance Steel & Aluminum Co. (NYSE: RS) was downgraded to Neutral with a price target of $82.

"We upgrade X to Buy from Sell as we are getting constructive on flat steel fundamentals and also see headwind from its cost cutting measures. We upgrade AKS to Buy from Sell as we expect the company to see notable margin expansion in 2015 and beyond as it executes its new iron ore strategy. We upgrade STLD to Buy from Neutral as we believe that benefits of non-res recovery are not priced into the stock. We downgrade RS to Neutral from Buy as it appears to be fully valued," said Tharani.

For an analyst ratings summary and ratings history on AK Steel click here. For more ratings news on AK Steel click here.

Shares of AK Steel closed at $4.60 yesterday.

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