1、North America Equity Research12 April 2019Equity Ratings and Price TargetsMkt CapPriceRatingPrice TargetCompanyTicker($mn)CCYPriceCurPrevCurEnd DatePrevEnd DateAllegheny TechnologiesATI US3,405.44USD27.20Nn/c24.00Dec-1928.00n/cStelcoSTLC CN1,073.07CAD16.18OWn/c31.00Dec-1936.00n/cTimkenSteelTMST US47
2、2.31USD10.59Nn/c14.00Dec-1914.50n/cFreeport-McMoRanFCX US19,538.37USD13.41Nn/c15.00Dec-19n/cn/cSource:Company data,Bloomberg,J.P.Morgan estimates.n/c=no change.All prices as of 11 Apr 19.North America Metals&Mining1Q19 Earnings Preview&CalendarNorth America Metals&MiningMichael F.Gambardella AC(1-21
3、2)622-Bloomberg JPMA GAMBARDELLA Tyler J.Langton(1-212)622-Stephanie Yee(1-212)622-J.P.Morgan Securities LLCSee page 22 for analyst certification and important disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware th
4、at the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.Steel prices declined through 4Q18 and into 1Q19,which should result in sequentially lower earnings across ou
5、r steel names.However,we think prices have bottomed and see them improving into 2Q19.Iron ore prices remain elevated as our team thinks it is unlikely for Vale volumes to return to the market in the near future.Higher steel raw material prices tend to bode well for domestic steel producers,as the U.
6、S.is the only country with sufficient supply in all three key raw materials:iron ore,met coal,and scrap.On the base metals front,we expect prices to be relatively range-bound as they have already appreciated double-digits YTD.We see demand holding up as we move into the seasonally stronger part of t
7、he year.We continue to favor the steel names in our coverage universe including X,STLD,and STLC.We also like CLF given a tight iron ore market and EAF as we think the companys earnings potential remains underappreciated by investors.AKS results should decline modestly q/q on slightly lower average r
8、ealized prices and margins,partially offset by higher seasonal shipments.We expect Xs earnings to decline meaningfully from 4Q18 levels,largely driven by lower steel spot prices and higher maintenance and outage costs in Flat Rolled.We are lowering our 1Q19E as well as our 2019 and 2020 estimates fo
9、r STLC mainly to reflect lower steel prices and modestly lower shipments.Based on our lower estimates,we are reducing our Dec-19 PT to C$31 from C$36.STLCs 1Q19 results should take a step down q/q due to lower realized prices,though company earnings should benefit from improved mix and lower tariff
10、costs.Earnings for STLD should decrease q/q mainly on lower prices and profits in its sheet operations,with a partial offset from higher seasonal shipments and increased profitability in Metals Recycling and Fabrication.Similarly,results for NUE should decline q/q with the sheet mills seeing lower p
11、rices and margins.For TMST,we are increasing our 2019 estimates to reflect anticipated higher prices from annual contract resets,but we expect Q1 results to decline q/q,driven by lower shipments and higher costs,partly offset by these higher prices.However,we are trimming our Dec-19 PT to$14 from$14
12、.50 based on a lower valuation multiple.We expect EAFs results to be weaker q/q driven by lower sales volumes with a partial offset from a higher weighted average realized price due to modestly more spot sales.2North America Equity Research12 April 2019Michael F.Gambardella(1-212)622- AAs results sh
13、ould decline sequentially from the impact of lower alumina selling prices in Alumina and lower aluminum selling prices in Aluminum(with the segment not fully benefitting from lower alumina prices due to its lag).Similarly,CENXs earnings should decline q/q due to lower aluminum prices and higher cost
14、s.We expect 1Q results for CLF to be adversely impacted by the typical seasonality of having limited ability to ship on the Great Lakes.Earnings for FCXshould be down q/q,with the benefit of higher realized copper and gold prices and positive settlement adjustments for provisionally priced copper be
15、ing offset by higher copper cash costs.We expect TECKs earnings to improve sequentially due to higher zinc,copper,and coal prices.We are lowering our 1Q19 and 2019 estimates for ATI to reflect weaker than expected 1Q results due to operational issues as well as our expectation for higher costs to li
16、nger through 2019.Based on our lower estimates,we are reducing our Dec-19 PT to$24 from$28.For HAYN,F2Q19 earnings should improve over F1Q19 levels,with most of the planned outage at Kokomo behind them.CRS F3Q19 results should increase q/q on continued solid demand,with earnings bolstered by typical
17、 seasonality.CSTMs 1Q19 EBITDA should be about flat y/y due to tough comps and as EBITDA in AS&I should decrease y/y mainly on higher costs to support its expansion efforts.We expect KALU shipments to increase 3.5%with value added pricing declining to$1.27/lb from 4Q18 levels of$1.32/lb and forecast
18、 an EBITDA margin as a%of VAR of 25%.Earnings for GSM should decrease q/q on lower realized prices and shipments.RS earnings should increase q/q on higher seasonal shipments,with its average realized pricing expected to be flat to down slightly.We forecast RYIs shipments to be up 8.5%q/q and expect
19、adjusted EBTDA ex-LIFO margins to bottom in the quarter.3North America Equity Research12 April 2019Michael F.Gambardella(1-212)622-DateEventTimeJPMEstimateStreetEstimateRisk to Street EPS*Comments and Conference Call DetailsApril 17Alcoa(AA/$28.49/OW)Earnings ReleaseConference CallAMC5:00pm($0.14)($
20、0.06)We are forecasting 1Q19E EPS of($0.14),down from$0.66 in 4Q18.The decrease should be driven by the impact of lower alumina selling prices in Alumina and lower aluminum selling prices in Aluminum(with the segment not fully benefitting from lower alumina prices due to its lag).More specifically,i
21、n 1Q19 on a sequential basis,AA expects to recover approximately two-thirds of the 4Q18 Alumina price/mix decline,or a benefit of about$30mm in 1Q19.The aluminum segment should see a$40-45mm benefit from lower alumina prices.However,increased pot relining and other maintenance activities are expecte
22、d to be a$30mm q/q headwind in the segment while flat rolled aluminum should see a decline of about$15mm.The company also stated that it expects the favorable impacts from current raw material spot prices to be offset by higher energy costs in 1Q19 and partially offset for the entire year.On the cal
23、l,we think most questions will focus on the outlook for alumina and aluminum prices,further actions the company could take to reduce costs,and capital allocation.CC#:877-883-0383;ID:9035802.April 22Steel Dynamics(STLD/$33.80/OW)Earnings ReleaseConference CallBMO10:00am$0.91$0.98We are forecasting 1Q
24、19 EPS of$0.91,or the higher end of STLDs guidance of$0.88-0.92.In 1Q,STLD expects earnings in its Steel Operations to decrease q/q mainly due to lower profits in its sheet operations.Total steel shipments are expected to increase,with the benefit being offset by steel prices declining more than scr
25、ap costs.Metals Recycling profitability should increase q/q on improved nonferrous volume and metal spread expansion.Fabrication earnings should increase sequentially from higher selling values and lower steel input costs,with a partial offset from lower shipments(mainly due to adverse weather condi
26、tions).On the call,key questions will likely revolve around the companys outlook for steel prices,thoughts on the Section 232,and demand in key end markets.CC#:862-298-07074North America Equity Research12 April 2019Michael F.Gambardella(1-212)622-DateEventTimeJPMEstimateStreetEstimateRisk to Street
27、EPS*Comments and Conference Call DetailsApril 23Allegheny Technologies(ATI/$27.20/N)Earnings ReleaseConference CallBMO8:15 am$0.11$0.20We are lowering our 1Q19E EPS to$0.11 from$0.26 to reflect weaker than expected results due to operational issues in both Flat Rolled and High Performance segments.T
28、he company pre-announced 1Q EPS of$0.10-0.13.We estimate Flat Rolled operating profit to decline by$20mm q/q from lower stainless surcharges,lower Precision Rolled Strip sales in China,as well as higher STAL JV costs.For High Performance,we lowered our margin estimate to 12%to reflect ongoing nickel
29、 powder billet supply issues and higher operating costs.During the conference call,we expect discussions and Q&A to include managements confidence in sustaining ATIs production despite Boeings 737 cut,possible updates on ATIs Section 232 exclusion request for its Tsingshan JV,and the companys capita
30、l allocation priorities.Please visit for the webcast.April 23Teck Resources(TECKB.TO/C$32.58/OW)Earnings ReleaseConference CallBMO11:00amC$1.31C$0.93We estimate TECKs 1Q19 EPS to be C$1.31,which is an increase over 4Q18 levels of C$0.86,primarily due to higher commodity prices.Coal production is exp
31、ected to be 6.3mm mt,a decline vs.4Q18 of 7.3mm mt but an increase vs.a year ago of 6.2mm mt.Our estimated copper production of 75kmt is roughly flat q/q and y/y,while Red Dog zinc production should be lower q/q due to typical seasonality.On the conference call,we expect discussions and Q&A to inclu
32、de managements view on the met coal market,QB2 progress,and the companys capital allocation strategy.CC#:800-239-9838April 23Nucor(NUE/$57.67/OW)Earnings ReleaseConference CallBMO2:00 pm$1.50$1.52We are forecasting 1Q19 EPS of$1.50,or the high end of the companys guidance of$1.45-1.50.Q1 earnings in
33、 NUEs Steel Mills segment should decrease q/q mainly due to lower prices and margins in its sheet mill group.The performance in its Raw Materials segment is expected to decrease q/q due to margin compression in NUEs DRI businesses from lower selling prices.Steel Products profitability should be roug
34、hly flat q/q.We expect discussions on the conference call to include market dynamics for sheet,plate,and rebar,updates on the companys numerous investments(including its recently announced plate mill),and managements capital allocation priorities.Please contact NUE for the CC#or visit for the webcas
35、t.5North America Equity Research12 April 2019Michael F.Gambardella(1-212)622-DateEventTimeJPMEstimateStreetEstimateRisk to Street EPS*Comments and Conference Call DetailsApril 23Kaiser Aluminum(KALU/$105.35/N)Earnings Release AMC$1.80$1.79We are forecasting 1Q19E EPS of$1.80,an increase over 4Q18 le
36、vels of$1.40.In the quarter,we estimate that shipments will increase by 3.5%with value added pricing declining to$1.27/lb from 4Q18 levels of$1.32/lb.We are forecasting an EBITDA margin as a%of VAR of 25%.Topics of interest on the conference call will likely include the companys ability to capitaliz
37、e on the aerospace and automotive cycles and the trade environment.April 24Constellium(CSTM/$8.82/OW)Earnings ReleaseConference CallBMO10:00am0.150.20We are forecasting 1Q19E EPS of 0.15 and EBITDA of 122mm.1Q19 EBITDA should be about flat y/y due to tough comps and as EBITDA in AS&I should decrease
38、 y/y mainly on higher costs to support its expansion efforts.On the call,we dont expect the company to make any changes to its 2019 guidance for EBITDA growth of 8-10%and FCF of greater than 50mm.We think most questions will focus on the ramp of Bowling Green and how demand in key end markets such a
39、s auto and aerospace is tracking.CC#:866-394-7514.Conference ID:9078647April 24Kaiser Aluminum(KALU/$105.35/N)Conference Call1:00pm CC#:844-889-7783April 25Cleveland-Cliffs(CLF/$10.05/OW)Earnings ReleaseConference CallBMO9:00am($0.14)($0.11)We are forecasting 1Q19E EPS of($0.14)and EBITDA of about b
40、reakeven.1Q19 results should see a meaningful step down from 4Q18 levels(EBITDA of$188mm)mainly due to limited ability to ship on the Great Lakes from normal weather conditions.As a result,CLF can only ship through rail,which leads to lower volumes and realized prices.During the conference call,we e
41、xpect management commentary and Q&A to include updates on the HBI project,capital allocation,and the outlook for the steel and iron ore markets.CC#:833-236-5758.Passcode:32756286North America Equity Research12 April 2019Michael F.Gambardella(1-212)622-DateEventTimeJPMEstimateStreetEstimateRisk to St
42、reet EPS*Comments and Conference Call DetailsApril 25Freeport-McMoRan(FCX/$13.41/N)Earnings ReleaseConference CallBMO10:00am$0.08$0.07We are lowering our 1Q19E EPS to$0.08 from$0.11 to reflect higher cash costs for the quarter,mainly as weather related issues impacted production and sales from the E
43、l Abra mine.FCXs EPS should be down q/q,with the benefit of higher realized copper and gold prices and positive settlement adjustments for provisionally priced copper being offset by higher copper cash costs.Key topics on the call will likely revolve around the continued de-risking of its operations
44、 in Indonesia(Grasberg Block Cave and Deep MLZ),expansion opportunities at FCXs existing assets,and thoughts on capital allocation with the divestment transaction for Grasberg now complete.CC#:800-403-5770 or 706-679-8487.Passcode:5889067.April 25Reliance Steel&Aluminum(RS/$90.78/N)Earnings ReleaseC
45、onference CallBMO11:00am$2.37$2.39We are forecasting 1Q19 EPS of$2.37,vs.the companys guidance of$2.35-2.456.Shipments are expected to increase 6-8%q/q and benefit from typical seasonal improvement.RS also stated that it expects price increases for many of the products it sells.However,its average r
46、ealized pricing in 1Q19 should be flat to down 1%q/q,as many of the price increases will not be fully effective in Q1 and as RSs pricing fell throughout Q4.Reliances Q1 guidance also assumes LIFO income of about$12.5mm.On the call,key questions will likely revolve around the companys outlook for ste
47、el prices and potential uses of cash for the company given its strong balance sheet and healthy free cash flows.CC#:877-407-0792.ID:13689183April 29AK Steel(AKS/$2.54/OW)Earnings Release AMC$0.14$0.15We are forecasting 4Q18E EPS of$0.14,or a q/q decrease compared to Q4 levels of$0.16.Shipments shoul
48、d increase in the mid-single digit range on typical seasonality.Both average realized prices and margins should be down slightly q/q.With 4Q18 earnings,AKS stated that it would stop giving quarterly guidance,but did provide full year 2019 guidance of$515-535mm for adjusted EBITDA,$160-180mm for net
49、income and$0.51-0.57 for EPS.This guidance was based on the January 2019 average carbon hot rolled coil spot price of roughly$720mm.AK also provided the sensitivity that each$10/ton change in the HRC spot price would impact adjusted EBITDA and net income by approximately$5-7mm on an annualized basis
50、.As HRC prices averaged$695/ton in 1Q19 and currently sit at$678/ton,AK could modestly revise its 2019 guidance lower.Key questions on the call will likely revolve around the companys outlook for steel prices,Section 232 and demand in key end markets.7North America Equity Research12 April 2019Michae