United States Steel Corp. (X) stock has been on the upward swing right from August 2017 and the shares have set a new soaring yearly record of $47.64 on March 1, 2018, helped by 25% steel tariff imposed by President Donald Trump. However, the stock had fallen more than 17% since March 1 as more tariff exemptions started getting approved. There remains a question popping up; does the stock have a solid investing foundation when looking at its numbers?
For the past 2 months, steel and aluminum stocks have been remaining in the luxury zone as Trump imposed global steel and aluminum imports tariff, specifically targeting China. Following the tariff announcement, the markets have taken a ride down the rollercoaster. The President later confirmed exemptions for several steel exporting countries. Reacting to this, China levied tariffs for American products, which sparked a trade war concerns among traders.
On April 10, news surfaced that Chinese President Xi Jinping lifted limits on foreign investment in automobile and aircraft industries. This eased trade tensions as can be seen from the markets that are trading higher.
In its recent fourth-quarter, U.S. Steel posted upbeat results as investments helped to provide more stable operating performance. The tax reform changes too drove the earnings higher. Total steel shipments increased by 2.8% for the quarter and average realized prices were higher than last year.
The company brought in more cash from ongoing regular business activities, which can be known from a 9.7% increase in cash provided by operating activities. The steel producer invested heavily in investments and incurred expenditures that led to a 22.3% wider cash used in investing activities. The company repaid more long-term debt and paid more dividends during this quarter while lowering its financing costs on the issuance of long-term debt.
United States Steel raised more current assets as of December 31, 2017, than last year and brought more property, plant, and equipment. On the other hand, current liabilities also increased 16.7%. The company was able to pay and bring down long-term debt. There were lesser employees who utilize retirement benefits, which can be known from a 37.6% dip in employee benefits. More investors contributed to the company’s equity for the period.
Zacks Investment Research remained positive on the company’s prospect and expects that the time is right for adding the stock to the portfolio as it will carry the momentum ahead.
Looking ahead, the company expects the 2017 performance momentum to continue in 2018. Net earnings are predicted to be about $685 million or $3.88 per share for 2018. Changes could occur from market conditions including rig counts, spot prices, energy prices, import volumes, customer demand, supply chain inventories, and raw material costs.
Fitch Ratings recently upgraded the company’s long-term issuer default rating and revised rating outlook to positive from stable. Fitch believes the 25% tariffs on steel imports would benefit U.S. producers in the short-term, but it remains less certain on the long-term.
Fitch views the spending on assets positively given that improved market conditions afford ample liquidity to support a period of higher capital expenditure after a period of maintenance level spending. Fitch believes the company has flexibility concerning the pace and scope of the program should there be a period of weakness in the steel market.
On recommendation trends, seven out of fifteen analysts are expecting a Hold rating and six analysts are predicting a Buy or Strong Buy rating. On growth estimates front, market analysts are expecting a 136.10% jump during the current year and 8.70% during next year. For the next five years, a 13.93% growth per annum is projected by the consensus.
Zacks Investment Research remained positive on the company’s prospect and expects that the time is right for adding the stock to the portfolio as it will carry the momentum ahead. Market analysts are recommending investors to hold on to the stock.
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