After being left for dead, steel stocks have tripled on the year

Steel stock talk

It's been an unreal year for steel stocks. Shares of U.S. Steel have surged 30 percent in the past week, and are now up more than 240 percent on the year, after the company's earnings release this week.

What's notable, besides that huge figure, is just how badly the analyst community has missed the move. At the end of the year, the analysts who covered U.S. Steel collectively had a median price target of $10.50 on the $7.98 stock, according to FactSet; by the end of February, the median target on the then-$9.12 stock fell to $6.75.

Fast-forward to the last trading day of July, when the stock rose as high as $27.55.

Some analysts were more bearish than their peers, to the point of tilting toward the apocalyptic. Deutsche Bank's Jorge Beristain titled his 2016 steel industry preview note "the hour of reckoning," explaining that "as Metals & Mining producers continue to come under further stock market pressure, we expect further credit rating downgrades, further dividend slashes, dilutive recapitalizations, possible forced equity raises and distressed asset sales and M&A to feature heavily in 2016"; he also predicted that "outright bankruptcies could be possible."

Read More Brace for steel industry 'reckoning': Deutsche Bank

As a result of this Dantean vision, Beristain reduced his price target on the stock to $5 in December.

But a funny thing happened between there and Chapter 11. Beristain feared rising supplies from a steel-flooded China, but the U.S. Department of Commerce imposed massive duties on Asian steel, after finding that steel producers had been "dumping" it onto U.S. markets. Import taxes on some types of steel rose as high as 522 percent.

This, of course, vastly improved the dynamic for companies like U.S. Steel and AK Steel. The higher prices have led these companies to crush their earnings estimates, and have mitigated the worst concerns around the sector. Both stocks have roughly tripled in value.

Yet analysts still don't appear to be entirely buying it. The median price target on U.S. Steel is now $19.50 according to FactSet, which implies that almost a third of the value will be lopped off of the stock. That said, there may be a lag effect here, since more target hikes might be announced as the earnings are digested.

Beristain, meanwhile, has lifted his price target to $23, noting the benefits provided by cost savings in addition to higher prices. Yet he warns that "risks remain" given that he expects to see "renewed import pressure." In the interim, his rating had been lifted from sell to hold.

To be sure, this isn't the type of "reckoning" Beristain was expecting.