Key Insights
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Steel prices have moved higher all over the world.
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In the U.S., the infrastructure plan should provide additional demand for steel.
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Steel stocks gained a lot of ground in 2022, but they continue to trade at reasonable valuation levels.
Steel stocks had a strong start of this year as problems with steel production in Ukraine and sanctions on Russia have created a tight market in the world. In addition, U.S. President Joe Biden has recently said that U.S. – made steel will be mandated for projects made under the infrastructure plan. In this environment, steel stocks will remain on investors’ radars.
Cleveland-Cliffs
Cleveland-Cliffs stock is up by more than 40% year-to-date, but the company’s shares still trade at a modest 8 forward P/E.
At this point, analysts do not believe that current pricing conditions will remain in 2023, so the analyst consensus predicts that the company’s earnings will decline from $5.89 in 2022 to $3.79 in 2023. However, analyst estimates are rising fast, so Cleveland-Cliffs stock may have more upside without multiple expansion.
Nucor
Nucor stock has also benefited from favorable market conditions and gained about 50% since the beginning of this year. Nucor has historically enjoyed a premium over its peers in the steel industry, and it is currently trading at almost 19 forward P/E.
It should be noted that analysts believe that Nucor 2023 earnings will decline by more than 50% compared to the projected 2022 earnings, and it remains to be seen whether such forecasts are accurate.
U.S. Steel
In the U.S. Steel case, analysts expect that the company’s earnings will decline from $10.8 in 2022 to $3.93 in 2023, so the stock is trading at 9 forward P/E.
Analyst estimates for the year 2023 have been moving higher in recent weeks, and the continuation of this trend should provide additional support to U.S. Steel stock.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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