mid-cap

Should you Book Profit on this Steel Stock – United States Steel Corporation?

Aug 02, 2022 | Team Kalkine

Read Time :5 min

United States Steel Corporation

X Details

United States Steel Corporation (NYSE: X) is a leading steel producer with operations spread across the U.S. and Central Europe. The company caters to various industries including automotive, construction, appliance, energy, containers, and packaging industries with high value-added steel products.

Financial Results for the Quarter Q2 FY22

The Group posted net sales of $6,290 mn during the quarter, compared to $5,025 mn reported in Q2 FY21. The growth was driven by decent performance across its diverse operating segments.
Net earnings in Q2 FY22 stood at $978 mn, compared to $1,012 mn reported in the prior corresponding quarter.
Under its buyback program, the company has repurchased $400 mn of its common stock in Q2 FY22.

Key Updates

On 28 July 2022, the Board of Directors has declared a dividend of $0.05per share of common stock and is payable on 8 September 2022.

Outlook

X is optimistic on its prospects and expects demand in industry sectors like line pipe and energy. It also anticipates decent traction in demand in the future from the current consumer-oriented stressed markets like automotive and appliance.

Key Risks

The company is prone to the risks of fluctuations in commodity and energy price. Geopolitical stress and supply chain disruptions have contributed to higher energy prices and inflation levels.

Valuation Methodology: P/E Based Relative Valuation (Illustrative)

Stock Recommendation

Over the last one month, the stock has given a return of ~39.84%. The stock is trading lower than the average price of 52-week low-high range for the stock at $39.25-$16.41, respectively.

The stock has been valued using a P/E multiple-based illustrative relative valuation, and the target price so arrived reflects a fall of low double-digit (in % terms). A slight premium has been applied to P/E Multiple (NTM) (Peer Average), considering the optimistic outlook.

Considering the recent rally in the stock price and risks associated, it is prudent to book profits at the current levels. Hence, a “Sell” rating has been given on the stock at the closing price of $23.80 per share, as on 01 August 2022.

Technical Overview:

Daily Price Chart

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

United States Steel Corporation is a part of Kalkine’s Global Big Money Product

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is August 02, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

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