TALKING POINT/STEEL COMPANIES
Steel stocks, which have had a healthy
runup recently, still present some short term investment
opportunities, according to some steel analysts.
    But others say the upturn, based on strong orders and firm
prices this spring, has been strictly seasonal and will end
soon. They recommend taking profits.
    "It's that time of year. This is strictly seasonal," said
Charles Bradford of Merrill Lynch and Co. "Orders will be
strong for about two months, and there are signs that some
(order rates) are starting to dive already."
    But Dean Witter Reynolds Inc analyst Clarence Morrison sees
some short-term potential in the group, which includes USX Corp
<X>, Bethlehem Steel Corp <BS>, Armco Inc <AS> and Inland Steel
Industries Inc <IAD>.
    "There is still some attractiveness to steels over the
short- to intermediate-term based on improved order rates and
rising prices," Morrison said. He only recommends one stock,
however, Inland, which is modernizing steelmaking operations to
make them more efficient.
    Despite his bearishness, Merrill's Bradford continues to
recommend Armco, which he sees as a major turnaround.
    Armco's steelmaking operations are profitable, the balance
sheet has been improved, and its oilfield equipment business
has been slimmed and put in a joint venture with USX, Bradford
noted. "It's not a high-quality investment situation yet but
they've come a long way," he said.
    "We think the stock will do moderately better than the
market," he said. Armco shares, trading off 1/4 at 10 today,
could go to 12, and possibly as high as 15, he said.
    Bradford sees Armco earning 50 to 75 cts a share in 1987,
before special gains from recouped investment tax credits,
against losses last year.
    Armco's 1988 earnings could be significantly higher, he
said.
    Bradford is recommending sale of USX shares. "We had a buy
on it below 20 but when it gets to 28, let somebody else have
it," he said.
    The steel and energy concern will earn about one dlr a
share in 1987, about half of that coming from asset sales, and
from two dlrs to 2.50 dlrs in 1988, Bradford said. "But a lot
depends on oil prices," he added. About 60 pct of USX's sales
come from oil and natural gas.
    Other analysts, including Michelle Galanter Applebaum of
Salomon Brothers Inc, recommend USX. "The company's done a lot
(of restructuring), more than the market's given them credit
for," she said.
    She sees the stock going to the mid 30s or higher. USX was
trading up 1/8 at 28-1/2. She predicts USX will earn 18 cts a
share this year and 2.73 dlrs next year against large losses in
1986.
    Applebaum, who is also positive on Armco and Inland, has
been recommending the stocks since last November.
    Peter Marcus of Painewebber Inc is neutral on the group
although he said the earnings outlook is improved through the
third quarter.
    But he sees potential trouble beyond then. "I think (steel)
prices on a bookings basis will start to drop by the summer,"
he said.
    Applebaum of Salomon Brothers also sees some seasonal
dropoff later in the year. "But there are more positives than
negatives," she said, citing reduced capacity in the domestic
industry, better prices, and a weaker dollar, which should
cause steel imports to drop off slightly from last year.
 Reuter
