KeyBanc Downgrades Olympic Steel (ZEUS) to Sector Weight

KeyBanc downgraded Olympic Steel (NASDAQ: ZEUS) from Overweight to Sector Weight. Analyst Philip Gibbs also reduced his U.S. real demand forecasts for carbon steel.

Gibbs explained, "We are lowering our 2015-2016 U.S. carbon steel real/core consumption forecasts to down 1.5% (from down 1%) and +2-2.5% (from +4.5%) to reflect a more subdued outlook for oil & gas (following recent retrenchment in crude and early inclinations of further E&P capex cuts in 2016) and further weakness in machinery/durables (emerging market infrastructure momentum, recent dollar strength vs. EM currencies). Our views on the construction, automotive and appliance markets are intact. Based on our reduced core demand forecast, we believe the carbon steel supply glut will persist until 2Q16, with over half the glut eliminated by year-end 2015 unless finished steel imports decline faster vs. our present expectations. We assume a 9% and 16% drop in finished steel import volumes in 2015 and 2016, respectively, vs. peakish 2014 levels, translating into a recovery in U.S. mill capacity utilization to 76% in 2016 (vs. ~71% in 2015E) at the expense of persistence of subdued U.S. pricing."

"Our revised real demand and pricing forecasts for 2015-2016 impact our estimates on distributors, particularly those with large industrial-centric exposures (namely ZEUS, which we move to SW)," added the analyst.

For an analyst ratings summary and ratings history on Olympic Steel click here. For more ratings news on Olympic Steel click here.

Shares of Olympic Steel closed at $11.31 yesterday.

You May Also Be Interested In

• BofA Securities Downgrades Principal Financial Group (PFG) to Underperform
• AmerX Starts Kodiak AI (KDK) at Hold
• B.Riley Starts Suncrete Inc (RMIX) at Buy