The Pittsburgh-based company’s stock is up about 70% over the past year.
U.S. Steel has been under scrutiny since Dec. 18, when a proposed acquisition by Nippon Steel Corp (OTCPK: NISTF) in a $14.1 billion deal.
Meanwhile, an investigation led by former Louisiana Attorney General Charles C. Foti, Jr. and Kahn Swick & Foti, LLC, is also assessing whether the proposed sale of United States Steel, where shareholders receive $55 per share, is fair or undervalues the company.
Here’s what analysts will be focusing on, and how the stock currently maps against Wall Street estimates.
U.S. Steel Investment Thesis
U.S. Steel is a major global steel company, with a 79% revenue from the U.S. and 21% from Europe. Nippon’s $55/share acquisition offer comes at a 40% premium. Financially sound, U.S. Steel has $3.22 billion cash on its balance sheet against $4.16 billion total debt.
Despite its sound financials, U.S. Steel is considered a speculative bet, many material sector investors prefer Nucor Corp (NYSE:NUE). Nucor offers 100% exposure to the U.S. with better margins, while Nippon trades at lower multiples and has a global reach.
Considering potential US economic downturn and geopolitical risks, defense industry dynamics may act as a tailwind for the stock. However, uncertainties in the EU present challenges.
U.S. Steel Analysts’ Focus Consensus Ratings
Q4 Analysts’ Focus: Analysts would be awaiting U.S. Steel management’s view and plans regarding the proposed Nippin deal. As the path ahead for this deal remains uncertain, analysts would likely be accounting for a greater margin of safety when it comes to U.S. Steel stock.
Ratings & Consensus Estimates: Consensus analyst ratings on U.S. Steel stock stand at a Neutral currently with a price target of $27.95. JP Morgan recently initiated coverage on the stock with a Neutral rating and a price target of…