On Monday, Jefferies initiated coverage on US Steel (NYSE: X) stock with a Buy rating, accompanied by a price target set at $45.00. The firm's analysis suggests that US Steel's valuation stands out within its peer group, noting that the company's share price is notably lower than the offer from Nippon, which has been accepted. As a result, the firm sees significant potential for the stock.
The coverage highlights US Steel's growth potential, particularly from its Big River 2 project, which is expected to contribute to the company's volume growth. The firm also anticipates that US Steel will benefit from its position as a blast furnace-basic oxygen furnace (BF-BOF) operator, sharing advantages with industry counterpart Cliffs, especially given its current product mix.
The rationale behind the Buy rating includes several key factors. Jefferies points out US Steel's relatively high leverage, which could be favorable in a context of strong demand and possible price increases. The firm also favors BF-BOF operators in a robust macroeconomic environment.
Another significant factor for the positive outlook is the expected demand surge following the resolution of the United Auto Workers strike. The strike's end was previously a catalyst for a sharp increase in flat-rolled steel prices in late 2023, and similar dynamics could unfold moving forward, potentially benefiting US Steel.
Jefferies' coverage suggests a promising outlook for US Steel, underpinned by a combination of valuation appeal, growth prospects, and favorable industry conditions. The $45.00 price target reflects this optimism for the stock's future performance.
InvestingPro Insights
As Jefferies initiates coverage on US Steel with a bullish stance, real-time data from InvestingPro reinforces the potential that analysts see in the company. With a market capitalization of $8.07 billion and a price-to-earnings (P/E) ratio standing at 9.28, US Steel presents an investment profile that may appeal to value-oriented investors. The company's adjusted P/E ratio has decreased to 8.02 in the last twelve months as of Q1 2024, indicating a potentially more attractive valuation compared to historical figures.
InvestingPro Tips highlight that US Steel has maintained dividend payments for 34 consecutive years, signaling a commitment to returning value to shareholders. Additionally, despite a decline in revenue growth by 12.6% in the last twelve months as of Q1 2024, the company remains profitable over the same period. These factors, combined with a solid track record of dividend payments, could be particularly reassuring for income-focused investors.
For those considering an investment in US Steel, there are 2 more InvestingPro Tips available that could provide further insights into the company's prospects. To delve deeper into these expert analyses, visit https://www.investing.com/pro/X and don't forget to use the exclusive coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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