This Steel Stock Surged On Benefits From Improving Business Environment

Shares of Commercial Metals Co. (NYSE: CMC) are up over 2% on the session, following an upgrade from J.P. Morgan to Overweight (from Neutral) and new price target of $30 (from $24).

Analyst Michael Gambardella sees a "much more constructive environment for steel imports" from the current Administration, citing yesterday's announcement from President Trump, enacting a 25% tariff on steel imports and 10% tariff on aluminum imports into the U.S. While details of the trade action remain fluid, Canada and Mexico will be exempted, pending successful NAFTA renegotiations. More importantly, President Trump is clearly establishing a new tone on international trade, offering a potential inflection point on the outlook for higher steel prices.

Gambardella also notes the new tone on trade will put foreign producers on notice, suggesting foreign steel importers will be more careful, as the Trump Administration will not tolerate unfairly traded steel. CMC should continue to benefit from ongoing consolidation in the steel rebar market, including CMC's recent purchase of Gerdau's U.S. assets, expected to drive higher rebar prices.

The new valuation at $30 is based on increased fiscal 2018 EPS estimates to $1.55 (from $1.42) and fiscal 2019 EPS estimates to $3.04 (from $2.38).

The new price target represents 19% upside from Thursday's close.

StreetInsider Premium first published a variation of this article at 4:51 AM ET. Try StreetInsider Premium for two weeks free here.

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