On Thursday, Jefferies adjusted its outlook on US Steel (NYSE: X), lowering the price target to $41 from the previous $47 while maintaining a Buy rating on the stock. The revision followed reports that the White House intends to prevent Nippon Steel's proposed takeover of US Steel due to concerns over national security. The news has led to a significant sell-off of US Steel shares.
The firm's analyst pointed out that the anticipated blocking of the acquisition by the government aligns with their initial expectations. Despite the current market reaction, the analyst believes that US Steel holds considerable intrinsic value as an independent entity. This perspective comes in the wake of the stock's sharp decline in value following the reports.
The analyst's commentary highlighted the firm's ongoing confidence in US Steel, reiterating the Buy rating despite the reduced price target. The new target reflects the current market conditions and the potential impact of the halted acquisition on US Steel's market position.
The White House's decision is part of a broader scrutiny of foreign investments and mergers in the United States, particularly when such transactions involve critical industries and national security interests. The administration's move to block the deal underscores the delicate balance between open-market policies and the protection of domestic industries.
US Steel's market performance and future prospects remain a focal point for investors, especially in light of the government's intervention. The updated analysis by Jefferies provides a revised expectation of the company's value, considering the recent developments and the halted acquisition's effect on the company's strategic direction.
In other recent news, U.S. Steel Corporation has been making significant strides in its operations and strategic plans. The company has warned of potential job losses and the closure of several steel mills if its planned merger with Nippon Steel does not proceed. The merger has received regulatory approvals from jurisdictions outside the United States and the approval of U.S. Steel's shareholders.
The company's employees have rallied in support of the merger, emphasizing its importance for the future of the company's operations and workforce. Nippon Steel has committed to a $2.7 billion investment in U.S. facilities, contingent on the deal's success.
U.S. Steel has also declared a dividend of $0.05 per share, scheduled for payment in September. The company has updated its Code of Ethical Business Conduct, incorporating guidelines for generative artificial intelligence applications.
Analysts from BMO Capital Markets have upgraded U.S. Steel's stock rating to Outperform, citing the company's undervalued status and potential profitability increase from strategic investments. Jefferies and Morgan Stanley have also expressed confidence in the company by initiating coverage with a Buy rating and upgrading their rating to Overweight, respectively.
Finally, U.S. Steel has projected its Q2 earnings to be at the lower end of its outlook, with adjusted net earnings per diluted share estimated to be in the range of $0.76 to $0.80 and adjusted EBITDA expected to be approximately $425 million.
InvestingPro Insights
In light of the recent developments with US Steel, InvestingPro data provides a deeper look into the company's financial health and market performance. The stock's recent sell-off is reflected in the one-month price total return, which shows a significant decrease of -24.21%, aligning with the broader market's reaction to the blocked acquisition news. Despite the downturn, US Steel has a history of resilience, having maintained dividend payments for 34 consecutive years, which may appeal to long-term investors seeking stability in dividends.
From a valuation standpoint, US Steel's current P/E ratio stands at 11.32, suggesting that the stock may be undervalued relative to earnings, especially when considering the adjusted P/E ratio for the last twelve months as of Q2 2024, which is even lower at 9.01. Additionally, the company's revenue for the same period is reported at 16.85B USD, indicating a sizable scale of operations despite a revenue decline of -11.39% during that time.
InvestingPro Tips highlight that analysts have revised their earnings expectations downwards for the upcoming period, which could be a factor for investors to consider. However, the same sources predict the company will be profitable this year, which might offer some reassurance amidst the uncertainty. For those interested in further analysis and tips, additional insights are available through the InvestingPro platform, which includes a total of 11 InvestingPro Tips for US Steel.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.