Needless to say, the Trump rally has been something, and the reason seems clear. For the first time in years investors are actually very positive on anticipated growth in the real economy. For years stocks traded up on low interest rates, but actual investor participation was lousy. With bond yields rising, the market sees growth and inflation, and that’s a big positive going forward.
One industry that has benefited big-time is steel. Between the expected infrastructure build-out and what many see as restrictions on Chinese dumping, the stocks have taken off. In a new report, Deutsche Bank raised price targets on five stocks rated Buy, and they said this in their report:
We have rebased our price targets for Steel and Service Centers to reflect $600/steel for 2017 estimates and 2018 estimates versus $500/steel and $550/steel prior. Pricing benefits will mostly flow to the bottom line as US mills face a more favorable cost outlook than global peers. Post-Trump’s win, renewed investor focus on Steels appears to support near-term momentum. As such we raise our price targets an average of 42% and re-iterate Buys.
Here are the five stocks rated Buy the Deutsche Bank team raises their price targets on.
This top steel company could do very well if the economy sees a solid pickup next year and the infrastructure push is in place. Nucor Corp. (NYSE: NUE) and its affiliates are manufacturers of steel products, with operating facilities primarily in the United States and Canada. Its products include: carbon and alloy steel – in bars, beams, sheet and plate; steel piling; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; steel grating and expanded metal; and wire and wire mesh.
Nucor, through the David J. Joseph Company, also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America’s largest recycler.
While the residential construction market could slow down some in 2017 after years of a very torrid pace, top Wall Street analysts remain positive on nonresidential commercial construction. Nucor has always kept a very conservative balance sheet and is poised for slow but steady growth next year and beyond, especially if a huge infrastructure build-out becomes a reality.
Nucor investors receive a 2.32% dividend. The Deutsche Bank price target was raised to $73 from $55, while the Wall Street consensus target is $56.38. The stock closed Monday at $65.10.
Reliance Steel & Aluminum
Deutsche Bank is positive on this top service center play. Reliance Steel & Aluminum Co. (NYSE: RS) provides metals processing services and distributes a line of approximately 100,000 metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium and specialty steel products. Its primary processing services comprise cutting, leveling, sawing, machining and electro polishing.
The company also fabricates and distributes structural steel components and parts; provides metal components and inventory management services; and distributes alloy, carbon and stainless steel bar and plate products, as well as steel and nonferrous and aerospace metals, including aluminum, steel, titanium, nickel alloys and aluminum bronze, offering full or cut to size materials.
Reliance serves general manufacturing, nonresidential construction, transportation, aerospace, energy, electronics and semiconductor fabrication, heavy and auto industries. The company sells its products to original equipment manufacturers, small machine shops and fabricators.
Shareholders receive a 2.0% dividend. Deutsche Bank raised its price target to $95 from $78, while the consensus target is $75.22. The stock closed yesterday at $85.71.