July 12, 2021 BARRON’S 9
PREVIEW
PRICING LIFTS STOCKS
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Monday 7/
FedEx hosts a conference call to
update the investment community
on its business outlook.
Tuesday 7/
Conagra Brands , Fastenal , First
Republic Bank ,and PepsiCo report
quarterly results.
Dell Technologies hosts a conference
call to discuss its ESG strategy.
The Bureau of Labor Statistics
releases the consumer price index for
June. Economists forecast a 4.9% year-
over-year rise, after a 5% jump in
May—the fastest rate of growth since
August 2008. The core CPI, which
excludes volatile food and energy
prices, is expected to increase 4%
compared with 3.8% previously.
The National Federation of Indepen-
dent Business releases its Small Busi-
ness Optimism Index for June. Consen-
sus estimate is for a 99.5 reading, about
even with the May figure.
Wednesday 7/
Bank of America , BlackRock , Citi-
group , Delta Air Lines , PNC Finan-
cial Services Group , and Wells
Fargo release earnings.
The Federal Reserve releases the
beige book for the fifth of eight times
this year. The report gathers anecdotal
evidence of current economic condi-
tions in the 12 Federal Reserve districts.
The BLS releases the producer price
index for June. Expectations are for
both the PPI and core PPI to increase
0.5% month over month. This com-
pares with gains of 0.8% and 0.7%,
respectively, in May.
Thursday 7/
Bank of New York Mellon , Cintas ,
Morgan Stanley , Taiwan Semicon-
ductor Manufacturing , Truist Fi-
nancial , U.S. Bancorp ,and United-
Health Group hold conference calls
to discuss quarterly results.
Friday 7/
Charles Schwab , Ericsson , Kansas
City Southern ,and State Street an-
nounce earnings.
The Bank of Japan announces its
monetary-policy decision. The central
bank is widely expected to keep its key
short-term interest rate unchanged at
negative 0.1%. In June, the BOJ said it
would launch a climate-change plan by
the end of this year, and would release
a preliminary plan at its July meeting.
This could take the form of higher in-
terest rates paid to banks for green-
lending measures.
The University of Michigan releases
its Consumer Sentiment index for July.
Economists forecast an 86.5 reading,
slightly higher than June’s 85.5. The
index is still well below its levels from
just prior to the pandemic.
The Census Bureau reports retail-
sales data for June. Consensus estimate
is for a 0.5% monthly decline in spend-
ing to $617 billion, after slumping 1.3%
in May.
Coming Earnings
ConsensusEstimate Year agoTConagra Brands (Q4) $0.52 $0.Goldman Sachs (Q2) 9.50 6.JPMorgan Chase (Q2) 3.13 1.PepsiCo (Q2) 1.53 1.WBank of America (Q2) 0.77 0.MoreEarningson PageM36.Consensus Estimate
Day ConsensusEstLastPeriodT June CPI 0.50% 0.60%W June PPI 0.50% 0.80%TH June Capacity Utilization 75.6% 75.2%June Industrial Production 0.65% 0.80%F June Retail Sales S/A -0.60% -1.3%May Business Inventories 0.40% -0.20%July Michigan Sentiment - p 86.5 85.Unless otherwise indicated, times are Eastern. a-Advanced;
f-Final; p-Preliminary; r-Revised Source: FactSetFor more information about coming economic reports- and what they mean - go to Barron’s free Economic
Calendar at http://www.barrons.com
JPMorgan Chase and Goldman Sachs Group kick off
earnings season by reporting results before the market
open. The two money-center banks recently lifted their
dividends 11% and 60%, respectively.
Tuesday
Sustaining a
Steel Snapback
Pricing for hot-rolled coils of steel has sizzled in the recov-
ery, and the heat has ignited steel stocks. United States
Steel and Cleveland-Cliffs are up two and three times the
S&P 500 index’s 15% gain this year, respectively, while
Nucor is up nearly 80%. And, as Credit Suisse analyst Curt
Woodworth sees it, steel stocks aren’t cooling down soon.
Tight supply has lifted the benchmark price of hot-rolled
coils to $1,600 per short ton from $500 a year ago. A num-
ber of analysts downgraded their ratings to Hold, recalling
how quickly imports crashed supply-constrained periods in
the past. But Woodworth believes that today’s upcycle will
endure for a couple more years—and that investors should
award the stocks higher multiples. “The rebirth of the U.S.
steel sector is a real event,” he writes in a note.
At today’s $97 a share, Nucor stock have almost 20%
upside to Woodworth’s target price of $115. Steel Dynam-
ics and Graftech International have about a 45% upside
to his targets, while United States Steel could rise 80%
from today’s $24, and Cleveland Cliffs by a third from $22.
He rates all of these stocks as Outperform.
Imports will remain subdued, he says, because of the
cheap dollar and China’s curb on polluting blast furnaces.
Domestic supply will rise slowly, he adds, through a ramp-
up of electric-arc furnace capacity. Demand from auto mak-
ers and renewable-energy developers will keep hot-rolled
coil prices well above $1,000 through 2022. Steel makers
can make fat profits at those prices—or even lower ones.
Woodworth thinks that Wall Street is discounting a
sharp correction in steel prices. But there is a new normal,
he writes. “Steel stocks are especially cheap.”—Bill Alpert
On a Roll
As economic activity has revived
in 2021, U.S. steel prices have
steadily risen.
Sources: Investing.com; FactSetSteel Returns
After a pandemic plunge, the big
U.S.steelstockshavebeenlifted
by stronger pricing.
U.S. Midwest Domestic Hot-Rolled
Coil Steel Futures, Year to Date
United States Steel, Nucor Stock
and Cleveland Cliffs, ’20 to YTD ’
Jan. March May July
0
500
1000
1500
$
Cleveland-Cliffs
UnitedStatesSteel
Nucor Corp.
2020 ’
0
100
200%
Illustration by Elias Stein