Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 30 Jan, 25 | X | Buy | USD 35.6 | USD 39.0 | USD 41.0 | 10 days | 15.2% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
United States Steel Corporation produces and sells flat-rolled and tubular steel products primarily in North America and Europe. It operates through four segments: North American Flat-Rolled (Flat-Rolled), Mini Mill, U. S. Steel Europe (USSE), and Tubular Products (Tubular). The Flat-Rolled segment offers slabs, strip mill plates, sheets, and tin mill products, as well as iron ore and coke. This segment serves customers in the service center, conversion, transportation, automotive, construction, container, appliance, and electrical markets. The Mini Mill segment provides hot-rolled, cold-rolled, and coated sheets and electrical steel products. This segment serves customers in the automotive, appliance, construction, container, pipe and tube, sheet converter, electrical, industrial equipment, and service center markets. The USSE segment provides slabs, strip mill plates, sheets, tin mill products, and spiral welded pipes. This segment serves customers in the construction, container, appliance and electrical, service center, conversion, oil, gas, and petrochemical markets. The Tubular segment offers seamless and electric resistance welded steel casing and tubing products, as well as standard and line pipe and mechanical tubing products primarily to customers in the oil, gas, and petrochemical markets. The company also engages in the real estate business. United States Steel Corporation was founded in 1901 and is headquartered in Pittsburgh, Pennsylvania.
Successful Strategic Investments: U.S. Steel achieved significant progress with the Big River 2 (BR2) facility, having spent over $4 billion in growth capital. This includes strategic investments in non-grain oriented electrical steel and a dual Galvalume®/Galvanized coating line, positioning the company for future growth and increased free cash flow.
Resilience in Earnings (Adjusted EBITDA): Despite facing weaker average selling prices, U.S. Steel reported an adjusted EBITDA of $319 million for the third quarter of 2024, demonstrating resilience in its business model. This, although lower than the $578 million reported in Q3 2023, reflects the company's ability to manage its operations effectively despite market pressures.
Lower Earnings in Key Segments: The North American Flat-Rolled segment reported a decrease in earnings, from $225 million in Q3 2023 to $106 million in Q3 2024. Additionally, the Tubular segment saw a significant decline, from $87 million in Q3 2023 to a loss of $4 million in Q3 2024, indicating challenges in these key areas of the business.
Decline in Net Sales: The company's net sales for Q3 2024 were $3.85 billion, down from $4.43 billion in the same period in 2023, representing a decline of approximately 13%. This decline indicates a reduction in revenue, largely attributed to lower average selling prices across segments.
Key investment risks for U.S. Steel include vulnerability to fluctuations in market prices, particularly in the Mini Mill and Tubular segments, potential challenges in achieving expected returns from large capital investments like Big River 2, and ongoing uncertainty in global demand, especially in Europe, which could impact profitability.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 35.6 | 33.75 | 39.0 | 41.0 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
U.S. Steel Reports Third Quarter Results: Demonstrating Resilience Amid Weaker Pricing
U.S. Steel President and CEO, David B. Burritt, discussed the company’s performance for the third quarter of 2024, highlighting a strong business model despite facing weaker average selling prices across its operating segments. The company reported an adjusted EBITDA of $319 million, underscoring its resilience. Burritt emphasized that the North American Flat-Rolled segment continued to benefit from a robust commercial strategy, which included leveraging a diverse product mix and increasing contracted volumes across various end markets. Despite softening market pricing in the Mini Mill segment, the company achieved an 11% EBITDA margin, adjusted for one-time start-up costs related to strategic projects. Additionally, the U.S. Steel Europe segment saw positive earnings due to a one-time favorable CO2 allocation adjustment, which helped offset a challenging demand environment in Europe. However, the Tubular segment’s earnings were lower than anticipated, reflecting weaker benchmark prices.
Strategic Initiatives and Growth at Big River 2
Burritt further commented on U.S. Steel’s strategic initiatives, with a particular focus on the company’s Big River 2 (BR2) facility. He announced the successful achievement of first coil at BR2, with shipments expected to begin in the fourth quarter of 2024. The BR2 facility represents a significant investment, with U.S. Steel having spent over $4 billion in growth capital, including the installation of a non-grain oriented electrical steel line and a dual Galvalume®/Galvanized coating line. Burritt expressed pride in the accomplishments of the Big River team, emphasizing the positive impact of these investments on the company’s enhanced commercial strategy. He highlighted that these investments, combined with the strength of the North American Flat-Rolled segment, position U.S. Steel for continued growth and increasing free cash flow.
Progress on Transaction with Nippon Steel Corporation
Burritt also provided an update on the ongoing transaction with Nippon Steel Corporation, which is expected to close by the end of the year. He noted that in September, the Board of Arbitration ruled in favor of U.S. Steel under the basic labor agreement, a significant milestone in the deal. Burritt also mentioned that Nippon Steel had committed to further investments, including the transfer of technologies and innovations from its $500 million annual R&D budget. These commitments are expected to strengthen the transaction, with a particular focus on investments in U.S. Steel’s Mon Valley and Gary plants, where Nippon Steel has pledged to invest at least $1.3 billion, raising the total capital commitment to at least $2.7 billion.
Fourth Quarter 2024 Outlook
Looking ahead, U.S. Steel’s outlook for the fourth quarter of 2024 anticipates adjusted EBITDA in the range of $225 million to $275 million. The North American Flat-Rolled segment is expected to see a slight decrease in results, driven largely by lower average selling prices. However, the Mini Mill segment is anticipated to show improvement, despite accounting for $25 million in start-up and one-time construction costs at BR2, as higher average selling prices are expected to boost results. In Europe, results are expected to decline due to the absence of the positive CO2 allocation benefit and continued weakness in demand and pricing conditions. The Tubular segment’s performance is expected to remain largely consistent with the third quarter.
Earnings Summary for the Third Quarter
For the third quarter of 2024, U.S. Steel reported net sales of $3.85 billion, a decrease from $4.43 billion in the same period of 2023. The company’s segment earnings before interest and income taxes (EBIT) showed significant variation across its segments. The North American Flat-Rolled segment reported earnings of $106 million, down from $225 million in the prior year. The Mini Mill segment recorded a loss of $28 million, compared to a profit of $42 million in 2023. U.S. Steel Europe generated earnings of $7 million, reflecting a slight improvement from a loss of $13 million in the previous year. The Tubular segment’s earnings were weaker, as expected, with a loss of $4 million, compared to earnings of $87 million in the third quarter of 2023.
Adjusted Financial Results
U.S. Steel also reported adjusted net earnings of $140 million for the third quarter of 2024, compared to $350 million in the same period of 2023. Adjusted net earnings per diluted share stood at $0.56, down from $1.40 in the prior year. The company’s adjusted EBITDA for the third quarter was $319 million, a decrease from $578 million in the previous year. For the nine months ended September 30, 2024, U.S. Steel reported adjusted net earnings of $557 million, down from $1.03 billion in 2023. Adjusted EBITDA for the year-to-date period was $1.18 billion, compared to $1.81 billion in the previous year. Despite the lower earnings, U.S. Steel remains focused on its strategic investments and continued growth prospects.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on United States Steel Corporation (NYSE: X) at the current price of USD 35.60, as on January 30, 2025 at 7:12 AM PST.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Basic Materials Industry: Steel
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| X United States Steel Corporation |
0.28 0.66% | 42.54 | 10.48 | 16.78 | 0.59 | 0.97 | 0.65 | 4.91 |
| NUE Nucor Corp |
-0.7 0.58% | 119.64 | 9.01 | 14.84 | 1.21 | 2.11 | 1.21 | 5.42 |
| PKX POSCO Holdings Inc |
-0.23 0.48% | 47.30 | 29.47 | 10.88 | 0.0004 | 0.68 | 0.0005 | 0.0057 |
| MT ArcelorMittal SA ADR |
0.12 0.42% | 28.97 | 5.71 | 7.20 | 0.33 | 0.42 | 0.39 | 3.50 |
| STLD Steel Dynamics Inc |
-1.36 1.09% | 123.72 | 9.12 | 11.40 | 1.18 | 2.50 | 1.23 | 6.20 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 30, 2025 at 7:12 AM PST. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer :
This report has been issued by StockNextt which has an Ontario Business Identification Number 1000958347 and British Columbia registration Number FM1051529 is a trade name under Kalkine Canada Advisory Services Inc. having Business Number 761925130BC0001. Kalkine Canada Advisory Services Inc. and StockNextt are collectively referred to as “StockNextt”, “we”, “us”, and “our”. The website https://stocknextt.com and associated pages are published by StockNextt. The information in this report and on the StockNextt website has been prepared from a wide variety of sources, which StockNextt, to the best of its knowledge and belief, considers accurate. StcokNextt has made every effort to ensure the reliability of information contained in its reports, newsletters, and websites. All information represents our views at the date of publication and may change without notice. The information in this report does not constitute an offer to sell securities or other financial products or a solicitation of an offer to buy securities or other financial products. Our reports contain general recommendations for investing in securities and other financial products. StockNextt does not offer financial advice based upon your personal financial situation or goals, and we shall not be held liable for any investment or trading losses you may incur by using the opinions expressed in our reports, publications, market updates, news alerts and corporate profiles. StockNextt does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. StockNextt’s general advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested. Please also read our Terms and conditions for further information. Employees and/or associates of StockNextt and its related entities may hold an interest in the securities or other financial products covered in this report or on the StockNextt website. Any such employees and associates are required to comply with certain safeguards, procedures and disclosures as required by law.
Copyright © 2023 Krish Capital Pty Ltd. All rights reserved. No part of this website, or its content, may be reproduced in any form without our prior consent.
