J.P. Morgan analyst Michael F Gambardella issued the double downgrade for the West Chester, Ohio-based company in a note to investors that cut earnings estimates and price targets for steel companies.
The note said that planned supply additions, trade uncertainties and some softening in demand are weighing on steel prices, which the analyst expects will fluctuate between $500 and $600 a ton over the near to medium term.
Gambardella also lowered his price target on U.S. Steel (X) - Get United States Steel Corporation Report by $12 to $14 a share, and cut his rating to neutral from overweight after the Pittsburgh-based company said it would likely post an adjusted third-quarter loss of 35 cents a share and continue idling two of its main U.S. blast furnaces linked to "the impact of falling steel prices through the second quarter, combined with the impact of a larger than expected drop in scrap prices."
J.P. Morgan also cut its earnings estimates for both companies, along with Nucor (NUE) - Get Nucor Corporation Report , Steel Dynamics (STLD) - Get Steel Dynamics, Inc. Report , Commercial Metals (CMC) - Get Commercial Metals Company Report and Toronto-based Stelco.
All the steel companies swung higher at midday after falling in early trading.
"It's the third steel company to provide a disappointing earnings view in just the last few days, with Nucor and Steel Dynamics giving you numbers well short of the Street's projections," TheStreet's founder, Jim Cramer, said last week following U.S. Steel's revised outlook. "U.S. Steel forecasts that things are only getting worse as a host of end markets weaken both here and in Europe and remember that's despite tariffs meant to boost its bottom line and cause more hiring, not idling."