BMO maintains Outperform on US Steel, keeps stock target on 3Q projection

On Friday, BMO Capital Markets sustained its optimistic stance on shares of US Steel (NYSE:X), reiterating an Outperform rating with a steady price target of $45.00. US Steel's projection for the third quarter of 2024 EBITDA is approximately $300 million, aligning with the company's initial forecast range of about $275-325 million. This figure follows a second-quarter EBITDA of $443 million and compares to BMO Capital's estimate of $284 million and the consensus estimate of $298 million.

The analyst from BMO Capital noted that US Steel did not provide specific future guidance but mentioned that the company is poised to benefit from the recent uptick in sheet prices. However, it was highlighted that the impact of these benefits might be moderated in the near term due to lower lagged contract pricing.

The commentary from BMO Capital indicates that there were no significant surprises in US Steel's financial performance or outlook. The third-quarter EBITDA expectation being in line with the company's original guidance suggests a stable financial position for US Steel.

US Steel's stock performance and investor expectations may continue to be influenced by market conditions and pricing dynamics in the steel industry. The maintained Outperform rating and price target reflect BMO Capital's continued confidence in the company's potential to perform well in the market.

Investors and stakeholders in US Steel will likely watch for any changes in market conditions that could affect the company's financial performance, especially in light of the analyst's comments on the potential tempering effects of lagged contract pricing on the benefits of rising sheet prices.

In other recent news, US Steel has been the subject of several analysts' reviews. Jefferies maintained its Buy rating on the company, while KeyBanc kept its Sector Weight rating. Morgan Stanley also upheld its Overweight rating, and GLJ Research upgraded the company's shares to Buy. These ratings came following US Steel's third-quarter earnings per share guidance between $0.44 and $0.48, with an adjusted EBITDA forecast of $300 million.

The company is set to commence operations of the new Big River 2 facility in the fourth quarter, which is expected to incur about $40 million in related costs within the third quarter. However, the completion of the Nippon transaction remains uncertain, with potential roadblocks identified by Jefferies.

US Steel's European segment is expected to post a quarter-over-quarter increase in adjusted EBITDA, while declines are forecasted in the Flat Rolled, Mini Mill/Big River, and Tubular segments. All these are recent developments that investors should take into account. Despite the challenges, the company remains confident in the approval of their pending transaction, following U.S. regulatory reviews, with the aim to finalize the deal before the year's end.

InvestingPro Insights

As US Steel navigates the market's dynamics, real-time data from InvestingPro provides additional insights into the company's financial health and stock performance. With a market capitalization of $8.48 billion and a P/E ratio that has adjusted to a more attractive 11.67 in the last twelve months as of Q2 2024, US Steel appears to be valued favorably in comparison to its earnings. The company's revenue, while experiencing a downtrend of -11.39% over the last twelve months as of Q2 2024, still stands strong at $16.85 billion, indicating a significant market presence despite the challenges.

InvestingPro Tips highlight that US Steel has maintained dividend payments for 34 consecutive years, showcasing a commitment to returning value to shareholders. This consistency in dividends could be a reassuring factor for investors looking for stability in their investments.

Moreover, analysts predict the company will be profitable this year, which aligns with the positive outlook presented by BMO Capital Markets. For investors seeking more detailed analysis, there are 3 additional InvestingPro Tips available that can provide deeper insights into US Steel's financial and operational performance. Visit https://www.investing.com/pro/X for access to these valuable tips.

With a steady dividend yield and the potential for profitability, US Steel's investment profile could be appealing for those looking for a blend of income and growth opportunities in the industrial sector. The InvestingPro metrics and tips serve as a valuable resource for investors aiming to make informed decisions based on the latest market data.

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