BlueScope Steel (ASX:BSL) is capable of addressing short-term cyclical pressures even as steel spreads and inflationary costs have forced the company to cut its first-half earnings guidance, Jarden Research said in a Thursday note.
The steel producer downgraded its earnings before interest, and taxes guidance for the first half of fiscal 2025 to AU$270 million to AU$310 million from a range of AU$350 million to AU$420 million.
In Jarden's view, operating performances have worsened weaker steel spreads, with Australia and North America emerging as the most impacted by the downgrade.
The investment and advisory group added that BlueScope Steel's cost-out program is "not enough to realize acceptable returns, amid cyclically low steel spreads," noting that "more radical structural efforts are now required."
Jarden, however, said it is confident that the company can address short-term cyclical pressures while building higher and less volatile earnings streams through a disciplined capital allocation process over time.
"In our view, the share price should find a level of support around NTA (plus land) backing of [AU$20 per share], with further support from an underlevered balance sheet and buyback," Jarden wrote.
Jarden revised its recommendation on BlueScope to neutral from overweight and lowered its target price to AU$21.90 from AU$23.
BlueScope Steel's shares fell past 1% in recent Thursday trade.
Price (AUD): $20.26, Change: $-0.27, Percent Change: -1.32%
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