Earnings season is approaching, with major North American steel companies gearing up to release results in the coming weeks.
JP Morgan analyst Bill Peterson notes that Steel equities have outperformed, rising 17% over the past three months versus the State Street SPDR S&P Metals & Mining ETF’s (NYSE:XME) 15%, supported by a supply-driven rally in Hot Rolled Coil (HRC) prices (+17%) despite weak underlying demand.
Notably, HRC metal margins have expanded more than 20% relative to pre-tariff levels, while post-tariff mill utilization is roughly 160 basis points above historical norms, adds the analyst.
Forward demand indicators are mixed, as medium- and smaller-scale buyers adjust to trade uncertainty, says the analyst.
However, the analyst writes that clarity on the United States-Mexico-Canada Agreement (USMCA) agreement and International Emergency Economic Powers Act (IEEPA) tariffs, which the Supreme Court of the US recently deferred, will likely be needed to trigger larger, steel-intensive projects.
The analyst maintained an Overweight rating for Nucor Corporation (NYSE:NUE), Commercial Metals Company (NYSE:CMC), and Reliance, Inc. (NYSE:RS).
Analyst’s Projections
Peterson expects price momentum to continue through at least the first quarter (JPMe HRC $955/t), though upside is limited by a narrowing import arbitrage, with a seasonal slowdown likely in summer after restocking.
The analyst expects fourth-quarter results to show weaker earnings due to seasonally lighter shipments and lagging sheet contracts (around 75% mini-mill mix) down as much as 8% quarter-over-quarter.
Investor discussions suggest a likely NUE beat, reflecting a conservative mid-quarter guide, while CLF may report weakness from elevated costs, adds the analyst
Also, the analyst says that RS could exceed its fourth-quarter/first-quarter EPS guidance (JPMe +5%/7% vs. BBG) on stronger pricing and lower customer pushback, though an unplanned outage at Steel Dynamics’s Butler mill and a transformer fire at Sinton pose shipment risks for the first-quarter.
Apart from this, the analyst notes that CMC's first-quarter results confirmed many large construction projects remain on hold but highlighted positive momentum in rebar fabrication, an area where NUE has exposure.
NUE Price Action: Nucor shares were down 0.65% at $173.86 at the time of publication on Friday. The stock is trading near its 52-week high of $175.94, according to Benzinga Pro data.
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