Here's What Makes U.S. Steel (X) Stock a Solid Choice Right Now
Shares of United States Steel Corporation X have shot up around 38% over the past six months. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
U.S. Steel currently sports a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.
Let’s delve deeper into the factors that make this steel maker an attractive choice for investors right now.
An Outperformer
U.S. Steel’s shares have surged 210.2% over a year against the 139.1% rise of its industry. It has also outperformed the S&P 500’s 35.5% rise over the same period.
Image Source: Zacks Investment Research
Estimates Going Up
Over the past two months, the Zacks Consensus Estimate for U.S. Steel for 2021 has increased around 130.3%. The consensus estimate for second-quarter 2021 has also been revised 22.3% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.
Solid Growth Prospects
The Zacks Consensus Estimate for 2021 earnings of $9.58 for U.S. Steel suggests year-over-year growth of 305.1%. Moreover, earnings are expected to register a 202.6% growth in the second quarter.
Positive Earnings Surprise History
U.S. Steel has outpaced the Zacks Consensus Estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of 24%, on average.
Upbeat Prospects
U.S. Steel recently announced upbeat guidance for second-quarter 2021. The company expects adjusted EBITDA to be around $1.2 billion for the quarter. The adjusted net income is forecast to be roughly $880 million. Also, the company expects second-quarter adjusted earnings per share to be roughly $3.08.
The company envisions higher steel prices and strong flat-rolled steel demand to deliver adjusted EBITDA that more than doubles its first-quarter performance. Strong demand and low steel inventories are supporting market improvements, and these fundamentals are expected to continue in 2022.
Adjusted EBITDA in U.S. Steel’s flat-rolled segment is projected to be more than double of the first-quarter level, aided by higher steel selling prices. The Mini Mill segment is also forecast to exceed the first quarter’s industry leading EAF-based performance. The segment is expected to witness record EBITDA margins, driven by improved efficiencies and higher steel selling prices.
Moreover, the company expects its European segment to benefit from continued strong demand and higher steel prices, leading to increased EBITDA performance compared with the first quarter. The Tubular segment is also witnessing a steady improvement in market conditions, the company noted.
Notably, U.S. steel prices have staged a strong recovery and hit record levels after plunging to pandemic-led multi-year lows in August 2020. The rebound has been driven by rising demand (especially in automotive and construction), tight supply conditions and higher raw material costs.
The benchmark hot-rolled coil (HRC) prices cruised above the $1,600 per short ton level for the first time in May 2021 and remain above that level this month. Notably, HRC prices have shot up nearly four-fold from the August 2020 low and are fast approaching the $1,700 per short ton level. As such, higher domestic steel prices should act as a catalyst for U.S. Steel.
United States Steel Corporation Price and Consensus
United States Steel Corporation price-consensus-chart | United States Steel Corporation Quote
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Nucor Corporation NUE, ArcelorMittal MT and Cabot Corporation CBT.
Nucor has a projected earnings growth rate of 344.9% for the current year. The company’s shares have surged around 135% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
ArcelorMittal has an expected earnings growth rate of 1,163.6% for the current fiscal. The company’s shares have surged around 188% in the past year. It currently carries a Zacks Rank #1.
Cabot has an expected earnings growth rate of around 137.5% for the current fiscal. The company’s shares have rallied 60% in the past year. It currently carries a Zacks Rank #1.
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