Stock Analysis & Ideas

United States Steel: Likely at a Cyclical Peak

United States Steel Corporation (X) is an American steel producer that manufactures and sells tubular steel products in Europe and North America. The company prominently focuses on the gas, oil, automotive, construction, container, appliance, and industrial industries. The company has also expanded its operations to transportation, mining, real estate, chemicals, and construction throughout its history.

As of 2021, the company has more than 27,500 employees. The company was established in 1901 by Elbert Gary, John Morgan, Charles Schwab, and Andrew Carnegie.

I am neutral on United States Steel Corporation as Wall Street analysts are generally neutral on the stock here, and it is likely at a cyclical peak which will see its earnings decline substantially in the years to come.


U.S Steel is a leader in the industry because of its stringent business model and principles. Throughout the company’s existence, the company has prioritized safety, respect, trust, ethics, and lawful conduct.

Since 2016, the company has seen its revenue increase by approximately 25%, which has been possible because it constantly cuts down its production costs and prioritizes an increasing workforce. Moreover, its robust liquidity position has also enabled it to focus on acquisitions. The company recently purchased a 49.9% ownership stake in Big River Steel.

Recent Results

In the third quarter of 2021, United States Steel Corporation reported earnings of $2 billion, which meant its diluted EPS for the quarter stood at $6.97. X’s adjusted net earnings for the quarter were $1.54 billion, or an EPS of $5.36 per share. For reference, the third quarter of 2020 showed a net loss of $234 million.

The company has also set up a $300 million share repurchase program. X believes that it can expand its strategic advantage to produce sustainable steel.

Valuation Metrics

X stock is very difficult to value given that it has generated very inconsistent results throughout its history and is currently generating extremely high profits. As a result, it is trading at very low valuation multiples. That said, analysts expect the company’s revenues, EBITDA, and normalized earnings per share to decline substantially in the coming years.

Wall Street’s Take

Turning to Wall Street, X earned a Hold consensus rating based on one Buy, two Holds, and one Sell rating in the past three months. Additionally, the average United States Steel price target of $32.50 puts the upside potential at 74.8%.

Summary and Conclusions

X stock looks very attractively priced to many investors who simply look at its very low valuation multiples and fail to examine the cyclical patterns of the steel industry. As a result, it is unsurprising that Wall Street analysts are generally neutral on the stock, though the average price target does imply substantial upside potential over the next year.

Given that the company is likely at a cyclical peak and will probably see its EPS decline substantially from current levels in the coming years, it might be prudent for investors to wait for a sharp pullback in the stock before initiating a position.

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