Nomura Securities on Metals & Mining: Deep Value Territory

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Nomura Securities on Metals & Mining: Deep Value Territory

Analyst, Curt Woodworth, said, "We reiterate our cautious view on US Metals & Mining sector, despite what appear to be oversold conditions. Valuations are now trading well below the historical trading ranges for virtually every company in our coverage universe. We reiterate Neutral for Freeport-McMoRan (NYSE: FCX) and Alcoa (NYSE: AA). Our bearish call on copper since our March initiation on FCX has largely played out, in our view. Nomura’s FX team remains bearish on EUR/USD (a headwind for all dollar-denominated commodities) and demand is weakening on global growth slowdown and end to Chinese restocking. We rate Vale (Nasdaq: VALE) Buy and Teck Resources (NYSE: TCK), Cliffs Natural (NYSE: CLF), and Walter Energy (NYSE: WLT) Neutral. We believe US coal stocks have the most downside EPS risk in 2Q and would avoid the sector into earnings. Domestic steel stocks are still in a bottoming phase and lack catalysts. Scrap prices continued to fall in July suggesting recent sector wide price hikes will be challenged during seasonally slow period."

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