U.S. Steel’s Stock Price Increased despite Flurry of Downgrades

  • U.S. Steel (NYSE:X) stock has closed with gains for two consecutive trading days even though broader markets closed in the red.
  • Wall Street analysts and credit rating agencies have taken a bearish view of the stock. Despite a flurry of downgrades, the stock has defied pessimism over the last two days.

U.S. Steel’s stock price

U.S. Steel stock gained 1.3% on April 1 even though the Dow Jones Index slumped. The stock closed with sharp gains on Monday despite broader markets closing in the red. Over the last few days, Wall Street analysts and credit rating agencies have given a dim outlook for the company. Last week, Deutsche Bank lowered its target price from $8.6 to $4. Credit Suisse also lowered its target price from $7 to $3. Bank of America analyst Timna Tanners had a $4 target price and reduced it to $3.

Stock is under pressure

Earlier this week, Moody’s downgraded U.S. Steel’s CFT rating to “Caa1” with a negative outlook. Notably, the company has a weak balance sheet. U.S. Steel will likely burn cash in 2020 and 2021, which would pressure its balance sheet more. Although the company announced a cut to its 2020 capex program and plant curtailments, the steps aren’t enough. US steel prices have faced pressure. There will likely be more pressure this month amid the slide in scrap prices. U.S. Steel stock has fallen by almost 44% this year. The stock fell sharply in 2018 and 2019. Also, the stock fell to its all-time lows last month. US steel stocks have sagged over the last two years despite President Trump’s Section 232 tariffs.

Will Trump’s infrastructure plans help?

Earlier this week, President Trump called for a $2 trillion investment into the infrastructure sector. Higher infrastructure outlay supports the demand for metals like steel and copper. Higher steel demand should also support the pricing environment, which has deteriorated amid the coronavirus. Meanwhile, infrastructure investments won’t pull U.S. Steel from its current mess. The company’s European operations also face challenges. The sharp fall in crude oil prices has hit the company’s Tubular segment, which produces products for the energy industry. Read U.S. Steel Is in Trouble, Not Due to Coronavius to learn more.