UBS downgrades Steel Dynamics as valuation catches up to growth

Investing.com -- UBS downgraded Steel Dynamics Inc to Neutral from Buy, saying the stock’s 22% rally since August has left limited upside despite steady fundamentals and strong cash generation potential. The brokerage raised its price target 4% to $165.

UBS said the share gains have been driven almost entirely by multiple expansion while consensus 2026 EBITDA estimates have barely moved. The stock now trades at about eight times 2026 forecast EBITDA, versus a five-year average of 6.5 times.

The bank still expects healthy medium-term growth from the company’s Sinton steel mill and aluminum operations, which could together add about $1.2 billion in annual EBITDA once fully ramped up. UBS also sees upside to aluminum spreads supported by 50% Section 232 tariffs, compared with 10% at the time of prior guidance.

Steel Dynamics’ Sinton facility posted record shipments in the third quarter, up 20% from the prior quarter, suggesting higher utilization and improved efficiency. UBS sees long-term potential for the aluminum mill to achieve around $650 million in annual EBITDA, or about $1,050 per tonne.

The bank forecasts U.S. hot-rolled coil prices to average $840 per short ton in 2026, supported by persistent import tariffs, a rebound in construction spending and restocking. Still, with the stock already pricing in those assumptions, UBS prefers Nucor, which it rates Buy with a $168 target, citing its recent underperformance.

While Steel Dynamics’ organic growth and cash returns remain compelling, its valuation “now reflects” the company’s strong 2026–27 earnings outlook, according to UBS

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