Time to Take Profit on Steel Names - Analyst (STLD) (WOR) (RS) (SCHN)

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Analysts at Jefferies are recommending investors reduce their exposure to steel equities, which might be poised for a material pull back. Valuations of steel stocks have expanded recently, in part because of QE3 and Chinese stimulus announcements. According to analysts, the trend is set to reverse and steel stocks could underperform broader industrial equity trends.

"Weaker scrap prices and steel demand trends noted in our recent industry surveys imply U.S. steel prices will decline near term toward (notably) lower global average levels," said analyst Luke Folta.

"Furthermore, leading demand indicators and global price levels for steel and inputs suggest 2013E earnings will fall short of prior expectations and we have reduced our estimates across the group accordingly," added Folta.

Jeffereis downgraded Steel Dynamics Inc. (Nadaq: STLD) Worthington (NYSE: WOR), Reliance Steel & Aluminum Co (NYSE: RS) and Schnitzer Steel Industries Inc (Nasdaq: SCHN) to Hold.

Analyst maintained a Buy rating on the most defensive stocks, including Nucor Corporation (NYSE: NUE) and undervalued GrafTech International Ltd (NYSE: GTI) Metals USA Holdings Corp (NYSE: MUSA) and Olympic Steel Inc. (Nasdaq: ZEUS).

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