U.S. Steel (X) made a fresh 52-week low on May 20. The stock is underperforming most of its peers this year and has lost 21.4% YTD (year-to-date).
Cleveland-Cliffs (CLF), which outperformed the broader steel space last year, continues to best steel stocks this year with its YTD gain of 24.7%.
U.S. Steel has received “strong buy” ratings from one analyst, while three have given it “buy” ratings. Ten analysts have given it “hold” ratings, while the remaining three polled by Thomson Reuters have given it “sell” or equivalent ratings.
U.S. Steel’s mean consensus target price of $19.29 represents a potential upside of 35.2% from its May 20 closing price. In contrast, U.S. Steel carried a price target of $22.71 on May 1, the day before its earnings release. Several analysts lowered U.S. Steel’s target price after its first-quarter earnings release and the announcement of its new capex plan. Jefferies lowered U.S. Steel’s target price from $24 to $18, while JPMorgan Chase lowered its target price from $33 to $31.
BMO lowered U.S. Steel’s target price from $23 to $17, while Morgan Stanley lowered its target price by $2 to $19. More recently, on May 8, UBS downgraded U.S. Steel from a “neutral” to a “sell” and lowered its target price from $22 to $10. Last week, Cowen also lowered U.S. Steel’s target price from $17 to $15.
U.S. Steel managed to beat both its top and bottom line estimates by a decent margin in the first quarter. However, the company’s massive investment plans seem to be making analysts pessimistic. U.S. Steel is expected to burn cash between 2019 and 2021 due to its capex plan. At the same time, US steel prices have fallen from their peak, which could hurt U.S. Steel’s earnings as well as its cash-generation capacity. Read Has U.S. Steel Corporation Bitten Off More than It Can Chew? for more analysis.