While the debate over any sort of taxes that are actually tariffs on foreign goods coming into the country will continue to rage, one thing has become pretty evident. In industries like steel, where product dumping by overseas companies and countries has been rampant over the years, a clear benefit would jump to domestic producers if a 20% border adjusted tax was imposed.

A new Jefferies research report makes the case that the border tax would drive higher prices and margins for domestic companies. In addition, the analyst feels that four companies would see dramatically higher EBITDA. The report notes this:

While margin expansion will be tempered by inevitable capacity growth, steelmakers with rising volumes and fixed cost leverage should continue to benefit. Out with the new normal – in with the old normal.

These are the four companies that Jefferies feels would have the biggest benefit from an EBITDA standpoint.

Nucor

This top steel company could do very well if the economy sees a solid pickup this year and the administration’s infrastructure push remains in place. Nucor Corp. (NYSE: NUE) and its affiliates are manufacturers of steel products, with operating facilities primarily in the United States and Canada. The company also is North America’s largest recycler.

Nucor products produced include: carbon and alloy steel, in bars, beams, sheet and plate; steel piling; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; steel grating and expanded metal; and wire and wire mesh. Through the David J. Joseph Company, Nucor also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap.

While the residential construction market could slow down some in 2017 after years of a very torrid pace, top Wall Street analysts remain positive on nonresidential commercial construction. Nucor always has kept a very conservative balance sheet and is poised for slow but steady growth next year and beyond, especially of a huge infrastructure build-out becomes a reality.

Nucor investors receive a 2.36% dividend. Jefferies has the stock rated Buy, and its price target is$77. The Wall Street consensus target is $64.76. The stock closed Wednesday at $63.87.

Steel Dynamics

Jefferies also is very positive on this company if the border tax is put in place. Steel Dynamics Inc. (NASDAQ: STLD) operates six steel mini-mills in Indiana, Virginia, Mississippi and West Virginia. Production capacity has been nearly 10 million tons, of a total 110 million U.S. capacity.

The company makes flat rolled products, special/merchant bars and structural steel products. Steel Dynamics can process about 7 million tons of ferrous scrap and has a downstream operation that processes finished steel.

Shareholders are paid a 1.5% dividend. Jefferies has a $45 price target for this Buy-rated company, and the consensus target is $40.60. The stock closed at $37.53.

U.S. Steel

This is the granddaddy of the domestic steel producers and another stock rated Buy at Jefferies. United States Steel Corp. (NYSE: X) is an integrated producer of flat carbon steel and pipe with a total 22 million tons of capacity in North America and Slovakia.

U.S. Steel’s system includes 11 blast furnaces in the United States and three blast furnaces in Slovakia. The company is the largest North American producer of seamless and welded tubular products.

It posted a solid fourth-quarter earnings beat, and analysts across Wall Street have turned decidedly more positive on the company and the prospects for this year and going forward.

Shareholders receive just a 0.51% dividend. The Jefferies price objective is $45. The consensus target is $34.27, but shares closed way above that Wednesday at $39.42.

Commercial Metals

Jefferies sees this as another EBITDA winner from the tax, but the shares are rated Neutral. Commercial Metals Co. (NYSE: CMC) manufactures, recycles and markets steel and metal products, and related materials and services in the United States and internationally.

As one of the leading suppliers to the nonresidential construction industry, Commercial Metals has revived as that area of the market has picked up. The U.S. Architecture Billings Index, an economic indicator that provides nine-month to 12-month growth forecasts of nonresidential construction spending activity, has shown growth in 21 of the past 24 months.

Shareholders receive a 2.16% dividend. The $22 Jefferies price target compares with the consensus target of $20.60, but shares closed Wednesday above both levels at $23.14.

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The border adjusted tax is an issue that raises howls from many as protectionist, which may influence the overall markets negatively. For investors looking at these companies, even without the implementation of the tax, the prospects for a huge infrastructure build-out make them solid growth ideas.

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