STOCKS TO WATCH U.S. Steel: Things Fall Apart?
Shares of U.S. Steel are rallying today after JPMorgan's Michael Gambardella wrote that this year's selloff has created "an excellent entry point" in its stock.
ByBen Levisohn June 7, 2017 10:20 a.m. ET
U.S. Steel's (X) stock has fallen apart this year after the U.S. steel company reported terrible first-quarter earnings--the market's judgement, not mine--and said it would need to spend more to increase production. And that year-to-date decline doesn't really do it justice, as U.S. Steel's stock has tumbled 48% from its February high.
ILLUSTRATION: AGENCE FRANCE-PRESSE/GETTY IMAGES
JPMorgan's Michael Gambardella and team, however, claim that U.S. Steel is "not falling apart," even if its stock has. They explain why:
In our opinion, X’s stock price reflects a far too negative view. The reinvestment needs and comparisons to competitors are grossly misunderstood. Management is preparing X’s facilities to exploit better supply and demand fundamentals in the U.S. as the Trump Administration should reduce import supplies in the near term and increase infrastructure demand longer term. Commerce Secretary Wilbur Ross plans to come up with a proposal for the Section 232 investigation to deliver to President Trump by the end of this month. We believe the Administration may opt for steel quotas in addition to existing tariffs as a way to stop foreign mills from circumventing our trade laws. This would have a significant positive impact on domestic steel fundamentals, steel pricing, and stock prices in our view. We believe X’s current stock price is an excellent entry point for investors.
Shares of U.S Steel have gained 2.9% to $20.88 at 10:14 a.m. today, while AK Steel has risen 2.3% to $6.03, Steel Dynamics has advanced 0.5% to $34.37, and Nucor has ticked up 0.2% to $57.91.