Despite global oversupply concerns and limited pricing, Goldman Sachs has found prospects in the U.S. steel sector under Cleveland-Cliffs (CLF, Financial) and Nucor (NUE, Financial). Analyst Mike Harris' is bullish on the back structural drivers such fiscal stimulus and favorable trade policies as well as cyclical elements including consistent demand and decreasing interest rates. The biggest flat-rolled steel manufacturer in North America, Cleveland-Cliffs gains from a completely integrated manufacturing process and a significant concentration in automotive-grade steel. Completing recently, its $2.8 billion acquisition of Stelco adds to its capacity. Goldman cited expected synergies from Stelco, value-adding projects, and cost-cutting efforts of the company as drivers of expansion.
From these initiatives, Harris expects margin expansion of 410 basis points by 2026 and a $600 million annual earnings boost. With a $16 price target, he gave a "Buy" rating representing 24% upside from current levels. Largest U.S. steelmaker Nucor is positioned to profit from little demand from industries like data centers. Goldman's optimistic outlook is supported by its strong balance sheet, low leverage, and margin expansion potential through 2026. With a $190 target, Harris gave a "buy" rating implying a 22.5% upside. Both firms stand out as structural winners in the face of industry difficulties.
