Bullish indicating open at $55-$60, IPO prices at $37
On Monday, BMO Capital Markets adjusted its stance on US Steel (NYSE:X), downgrading the company’s stock rating from Outperform to Market Perform, while setting a price target of $45.00. The move reflects BMO’s assessment that the stock is approaching its fair fundamental value, prompting a more cautious outlook. Trading at $43, the stock sits just 2% below its 52-week high of $44.87, with a notable year-to-date return of 26.7%. According to InvestingPro analysis, US Steel appears fairly valued at current levels.
The downgrade by BMO Capital analysts comes amid ongoing discussions regarding a potential transaction between Nippon and US Steel. Despite the conversations with the government, there remains considerable uncertainty. President Trump has indicated support for Nippon’s investment in US Steel but has expressed opposition to the idea of full ownership by the Japanese firm. InvestingPro data reveals that four analysts have recently revised their earnings expectations downward for the upcoming period, with the next earnings announcement scheduled for April 24.
According to BMO Capital, this level of uncertainty is currently too significant to continue recommending US Steel stock as Outperform based on the potential transaction alone. The firm’s analysts believe the market has largely priced in the current state of affairs, leaving limited upside for the stock under the prevailing conditions. This assessment aligns with the company’s current P/E ratio of 25.15 and its overall Financial Health Score of "GOOD" as reported by InvestingPro, which offers comprehensive analysis through its Pro Research Report, available for over 1,400 US stocks.
US Steel shares may experience fluctuations as investors digest the implications of BMO’s downgrade and the ongoing uncertainty surrounding the Nippon/US Steel deal. The market’s response will likely hinge on how the situation unfolds, particularly with respect to the government’s stance on foreign ownership in the steel industry.
In summary, BMO Capital’s revision of US Steel’s rating to Market Perform reflects a cautious approach in light of the unresolved status of the Nippon/US Steel transaction and the broader market context. The price target of $45.00 stands as BMO’s valuation benchmark for the steelmaker’s shares moving forward.
In other recent news, United States Steel Corporation has announced its financial guidance for the first quarter of 2025, projecting an adjusted EBITDA of approximately $125 million. The company expects adjusted net earnings per diluted share to range between a loss of $0.53 and $0.49. Meanwhile, Nippon Steel has delayed the closure of its proposed takeover of U.S. Steel for the second time, now expecting the deal to close in the second quarter of 2025. Despite the delay, Nippon Steel asserts that this will not impact its earnings. In a related development, U.S. Steel is urging its shareholders to support its current board amid a proxy contest with Ancora Holdings Group, which is advocating for a postponement of the company’s 2025 Annual Meeting. Ancora argues for greater transparency about the blocked sale to Nippon Steel and future company plans. Additionally, Nippon Steel remains committed to pursuing a transaction with U.S. Steel despite political opposition, with ongoing discussions about potential investment terms. The outcome of these developments could significantly impact U.S. Steel’s strategic direction and shareholder value.
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