Markets & Finance

Analyst Actions: Steel Dynamics, Nucor, Alcoa, Fuel Systems


From Standard & Poor's Equity ResearchSTEEL DYNAMICS AND NUCOR UPGRADED AT UBS FINANCIAL TO BUY FROM NEUTRAL

UBS Financial analyst Timna Tanners says Steel Dynamics (STLD) is the best North American steel operator, with the most aggressive track record deploying capital vs. peers. The analyst thinks the company's long scrap position and spot exposure particularly benefit it near term.

Tanners says Nucor (NUE) is a solid performer and its LIFO earnings can be more stable than peers'.

Tanner notes that a proprietary distributor survey indicated steel price pass-through generally successful and prices can rise further. The analyst thinks second and third quarter EPS for STLD and NUE will beat expectations.

Tanner believes North American steel stocks have oversold, and sees robust EPS reports reminding investors of the group's attractiveness. The analyst has a 41 price target on STLD and $85 on NUE.

FRIEDMAN BILLINGS UPGRADES ALCOA TO OUTPERFORM FROM MARKET PERFORM

Friedman Billings analyst Amir Arif says Alcoa's (AA) second quarter EPS was in line with his estimate. Looking ahead, he says third quarter results will be impacted by a seasonal slowdown in the downstream segment, additionall input cost pressures in the upstream business, and additional costs tied to Western Australia gas disruptions and outages in Rockdale, TX.

However, Arif notes aluminum prices are currently at $1.43/lb, above the second quarter's average of $1.36/lb., which should offset these other negative issues, allowing third quarter EPS to be near his current $0.70 estimate.

Also, he notes aluminum prices have risen 7% since June 1, while AA has fallen 18%; he believes this discrepancy further enhances AA's investment attraction. He keeps 43 price target on the stock.

BROADPOINT CAPITAL UPGRADES FUEL SYSTEMS SOLUTIONS TO BUY FROM NEUTRAL

Broadpoint Capital analyst Ron Oster says, as of yesterday's close, Fuel Systems Solutions (FSYS) stock was down 34% since hitting its 52-week high on June 23, compared with a 6% drop in the Russell 2000 Index. He believes this represents an attractive entry point, so he upgrades FSYS.

He also says he fully anticipates annual revenue guidance will be raised, and that FSYS could report second quarter results that exceed consensus expectations. Notes his 2008 revenue estimate ($379 million) is already above management's guidance ($320 million); but says there may be additional upside to his 2009-2010 revenue estimates, and his margin assumptions.

Oster has a 36 target price on the stock.


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