Commodities & Metals

Credit Suisse: 'Let's Not Split Hairs' Over the Steel Supercycle


The Outperform rating on Nucor Corp. (NYSE: NUE) was maintained, but the frim raised its price target from $75 to $95.

The analysts expect continued “strong growth potential given sizeable organic growth spend with high IRRs [internal rates of return] and history of accretive M&A which we expect to accelerate.” Nucor “is a clear winner from rebar consolidation and the rebar micro-mill investments appear well timed.”

Steel Dynamics

Steel Dynamics Inc. (NASDAQ: STLD) shares were maintained Outperform as well, but the firm raised the price target to $72 from $61.

The analysts are expecting a “step function increase of ~50% to [Steel Dynamics’s] sheet existing flat rolled footprint.” The company is also expected to generate more than $6 per share in free cash flow in each of 2021 through 2023, allowing for “material capital return to shareholders as well as to fund further opportunistic growth.”


Over-the-counter-traded Stelco Holdings Inc. (STZHF) was maintained at Outperform and its price target was raised from C$26 to C$38.

Canada-based Stelco “will sustain a significant cost advantage vs peers, especially in a higher scrap price environment which we see continuing in the medium term.” Beginning in 2022, the analysts expect Stelco to “pivot more maintenance capex spending levels which coupled with the strong FCF [free cash flow] windfall projected in 2021, should allow for substantial special dividends to be paid out” beginning in the second half of this year.

Commercial Metals

The Outperform rating on Commercial Metals Co. (NYSE: CMC) was lowered to Neutral, even though the firm raised the price target from $25 to $33.

Commercial Metals is a steel recycler, long-steel (bars, rods, rails, and so on) producer and steel and metal fabricator with operations in the United States and Poland. Higher capital costs are possible following a $300 million micro-mill investment and “the impact on FCF yield could limit relative value argument.” Valuation multiples have jumped due to optimism over the U.S. infrastructure bill, but Credit Suisse believes that work won’t begin on any projects until late next year.