- Morgan Stanley (NYSE:MS) is out in defense of U.S. Steel (NYSE:X), saying last week's 25%-plus drop and the roughly $1.6B market cap it shaved from the stock was overdone.
- Last week's shellacking (I, II, III) implies X's the hit from the asset revitalization program could persist for a full four years and even grow somewhat after factoring in the present value discount, but Stanley analyst Evan Kurtz believes the first year of an asset revitalization program is the worst, and things should look up in the subsequent years as an increasing number of refurbished assets will be added to the mix, lowering costs and boosting volumes.
- X effectively cut ~$400M from its 2017 EBITDA guidance on higher costs while the asset revitalization is underway for 3-4 years, the firm says.
- Stanley maintains its Overweight rating but cuts its price target to $34, down from a previous $48; Macquarie, Deutsche Bank (DE:DBKGn), and BofA Merrill Lynch all downgraded the stock last week and cut their price targets.
- Now read: U.S. Steel Gets Bent
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