Sims (ASX:SGM) is treading strongly, with fiscal 2026 guidance well ahead of consensus, led by strength in the North and South America joint venture, offsetting a weak Specialty Steel (SLS) business, Jefferies said in a note on Wednesday.

The metal recycling company's fiscal 2026 guidance was around 10% above Jefferies' estimates, supported by favorable US trading margins.

Jefferies forecasts the North and South American joint venture to perform "materially better" in the second half of fiscal 2026 due to robust US ferrous and non-ferrous trading.

However, a challenged set up for metals businesses remains, owing to oversupply in China steel. Scrap prices in both export markets and domestically also continue to be under pressure.

The investment firm sees non-ferrous conditions, which were better-than-expected in the first half, to remain steady in the second half, it added. Jefferies maintained its underperformance rating due to lack of clarity on Specialty Steel and raised its price target to AU$19 from AU$17.40.