Commodities & Metals

Are Steel and Metal Stocks Forming a Bottom?

AK Steel

AK Steel Holding Corp. (NYSE: AKS) had a Hold rating reiterated by Jefferies, as well as a lower the price target of $3.75, from $4.75. Also Macquarie downgraded AK Steel to Neutral from Outperform on March 23 and lowered its price target to $4 from $8. The company offered weak guidance last Thursday, and the company said it expects to post a first-quarter loss in the range of $0.23 to $0.28 per share. The consensus analysts’ estimate called for EPS of $0.01.

Shares of AK Steel closed up 1% at $4.09 on Monday, despite one analyst slashing the price target in half. AK Steel has a 52-week trading range of $3.62 to $11.37, and its consensus price target is currently $5.67.

After last week’s lower guidance, AK Steel shares went as low as $3.80, after having been at almost $4.20 prior to the earnings warning. Closing at $4.09 implies that the stock has already regained three-quarters of what its warning took out of the stock.

ALSO READ: Why Merrill Lynch Threw In the Towel on Aluminum

Alcoa

Alcoa Inc. (NYSE: AA) saw Sterne Agee cut its price target to $17 from $20 on March 23, as well as its EPS estimates for the coming years. The 2015 EPS estimate was cut to $1.09 from $1.16 and 2016 EPS were lowered to $1.28 from $1.39. Merrill Lynch made a very similar call on Alcoa earlier in March, based on worsening fundamentals in the aluminum industry as a whole. At that time Alcoa shares were around $14.29.

Investors should look closer at Alcoa than the other stocks mentioned here. The reason is that its chart has not caught up with the steel stocks — in the sense that it has not acted yet as though it is finding a bottom. That being said, this former Dow Jones Industrial Average component’s shares are now barely $1 above their 52-week low. That alone is not good by any means. Still, it is no secret that some investors consider stocks at or drifting toward 52-week lows as candidates for potential turnaround stocks. Again, “potential” turnarounds. At least Alcoa is making diversifying acquisitions to broaden its model.

Shares of Alcoa closed up 0.2% at $13.00. The consensus price target is $18.58, and the 52-week trading range is $11.85 to $17.75.

Commercial Metals

Commercial Metals Co. (NYSE: CMC) received a reiterated Buy rating from Jefferies on March 16 and a lower price target of $21, down from $22. With shares down closer to $15, this stock actually saw its most recent lows back in late January.

Shares of Commercial Metals closed Monday’s trading session up 2.7% at $15.18, on above-average trading volume. The consensus price target is $18.50. The 52-week trading range is $12.80 to $19.83.

ALSO READ: Can US Steel Companies Ever Realize Their Turnarounds?

Below is a chart montage from StockCharts showing the move for each of these key metals stocks.