Shares of U.S. steel companies rose Thursday on expectations that recent sharp price hikes will lead to strong first-quarter reports, which begin next week.
U.S. steel companies begin reporting April 17, with Nucor Corp. and Reliance Steel & Aluminum Co. among the first to disclose results.
"Most steel producers are well positioned to report better-than-expected results due to the recent surge in global and North American steel prices," CIBC World Markets analyst Michael Willemse said Thursday in a client note.
Benchmark hot-rolled sheet prices have increased between $250 and $300 per ton since December, to about $800 per ton to $850 per ton for May delivery, the analyst said.
He forecast first-quarter earnings per share for United States Steel Corp. of $2.24. On average, analysts polled by Thomson Financial project income of $1.83 per share.
For Gerdau Ameristeel Corp., Willemse expects earnings per share of 43 cents, compared with an average analyst estimate of 35 cents.
For Nucor, he expects profit of $1.30 per share compared with an average analyst estimate of $1.32 per share.
In the second quarter, steel prices are expected to rise and remain at those levels through the summer, a trend that will particularly benefit United States Steel and AK Steel Holding Corp., Willemse said.
The analyst also said that cost increases for scrap iron are expected to squeeze profit margins of Nucor, Commercial Metals Co. and Gerdau Ameristeel, though the impact may be mitigated by internal scrap supplies.
In late morning trading, shares of United States Steel rose $1.84 to $143.47; Nucor rose $1.28 to $70.69; and AK Steel rose $2.01, or 3 percent, to $65.93. Shares of Commercial Metals rose 9 cents to $31.94, and Steel Dynamics Inc. rose 20 cents to $35.34.
Schnitzer Steel Industries Inc. rose $1.19 to $80.72. Industrial Services of America rose 35 cents, or 3 percent, to $11.50.
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