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Here’s Why U.S. Steel (X) Should Be in Your Portfolio Now


United States Steel Corporation X stock looks promising at the moment. The company has seen its shares pop around 34% over the last three months. We are positive on its 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.

Let’s delve deeper into the factors that make this steel giant an attractive investment option.

What’s Working in Favor of X?

Solid Zacks Rank & Score: U.S. Steel currently sports a Zacks Rank #1 (Strong Buy) and also has a VGM Score of B. Here V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three scores. Such a score allow investors to eliminate the negative aspects of stocks and select winners.

Strong Q4 and Upbeat Outlook: U.S. Steel swung to a profit in the fourth quarter of 2017, supported by benefits of the investments in its assets. The company also topped earnings and revenue expectations in the quarter.

The company logged profits of $159 million or 90 cents per share in the quarter, as against net loss of $105 million or 61 cents recorded a year ago. Adjusted earnings of 76 cents per share trounced the Zacks Consensus Estimate of 68 cents.

Revenues rose roughly 18.2% year over year to $3,133 million in the quarter, also surpassing the Zacks Consensus Estimate of $3,068 million.

The company’s Flat-Rolled segment posted solid results in the quarter. Profits for the unit surged around 42% year over year to $92 million. Total steel shipments for the segment rose roughly 3% year over year.

U.S. Steel stated that its focus in 2018 will be on improving the fundamental drivers of business including quality, delivery, cost and safety. The company expects the performance momentum it witnessed last year to continue in 2018.

U.S. Steel is also implementing an asset revitalization plan (a part of its Carnegie Way initiative) in the Flat-Rolled segment, aimed at improving its profitability and competitiveness. The company plans capital investment of $275-$325 million in Flat-Rolled asset revitalization in 2018.

For 2018, U.S. Steel expects net earnings of around $685 million or $3.88 per share and EBITDA of roughly $1.5 billion, considering market conditions at their current levels. In 2017, the company posted net earnings of $387 million or $2.19 per share. Its EBITDA increased more than three-fold year over year to $1,109 million in 2017.

An Outperformer: U.S. Steel has significantly outperformed the industry over the last six months. The company’s shares have rallied around 65.2% over this period, compared with roughly 21% gain recorded by the industry.

The rally has been, in part, driven by the company’s forecast-topping earnings performance in the last two quarters. The stock also got a significant boost last month after the U.S. Department of Commerce issued its reports on its probe into imports of steel and aluminum products and recommended President Donald Trump to impose tariffs or quotas on these imports.

Moreover, President Trump’s recent proposal of imposing tariffs on imported steel and aluminum has also sparked a rally in U.S. Steel’s shares.

Strong Growth Prospects: The Zacks Consensus Estimate for earnings for 2018 for U.S. Steel is currently pegged at $3.76, reflecting an expected year-over-year growth of 93.8%. Moreover, earnings are expected to register a 16% growth in 2019. The company also has an expected long-term earnings per share growth of 8%, higher than the industry average of 6.9%.

Other Stocks to Consider

Other top-ranked companies in the basic materials space include Olympic Steel, Inc. ZEUS, Steel Dynamics, Inc. STLD and LyondellBasell Industries N.V. LYB, all sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Olympic Steel has an expected long-term earnings growth rate of 7.5%. Its shares have gained 16% over the past six months.

Steel Dynamics has an expected long-term earnings growth rate of 12%. Its shares have rallied roughly 38% over the past six months.

LyondellBasell has an expected long-term earnings growth rate of 9%. Its shares have rallied around 20% over the past six months.

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