NEW YORK (TheStreet) -- The conventional wisdom has turned negative on steel.
, for example, cut its stock ratings on
Monday to neutral from buy.
Last week, Nucor,
all issued warnings to Wall Street that their third-quarter results would likely be worse than expected.
The Goldman downgrades follow a bearish call on Friday by
steel analyst Mark Parr, who cut his 2010 EPS targets for U.S. Steel, Nucor, AK Steel, Steel Dynamics and the iron ore miner
Cliffs Natural Resources
Throughout the industry, profit margins are being squeezed by high raw materials costs and an inability by steelmakers to pass those costs on to customers still stung by the recession. For many steelmakers, the moribund commercial construction business has been the main culprit.
Parr wrote in his note to clients, "Companies appear to be incrementally pushing out the initial recovery time frame in non-residential construction end markets from" the second half of 2011 to "as late as 2013-2014."
In a note Monday, Goldman's metals equities analyst Sal Tharani wrote that he expects "steel prices to remain range bound, and steel fundamentals are expected to remain lackluster near term."
He slashed his 2011 and 2012 earnings targets for U.S. Steel. Tharani now expects the Pittsburgh company to earn $3.60 a share in 2011, down from an earlier estimate of $5.50. He revised his 2012 forecast to $6 from $7.50.
As for Nucor, Tharani drastically scaled back his 2010 and 2011 EPS targets. Respectively, his forecasts went to 64 cents from $2.80 and to $1.14 from $4.
In morning trading Monday, U.S. Steel shares were falling 3% to $44.84, while Nucor was slipping 1% to $38.38.
Among other sector names, AK Steel shares were down 1.5% to $13.63, Steel Dynamics down 0.5% to $14.94, and
down 1% to $32.49.
-- Written by Scott Eden in New York
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