US Steel Raised To Buy At Argus On Strong Momentum

Argus has upgraded United States Steel Corporation (NYSE: X) to Buy from Hold, with $30 target price, on strong momentum.

"We expect U.S. Steel to benefit from margin improvement, new tariffs on imported steel, and a stable to falling dollar, and to return to profitability sooner than we previously expected," analyst David Coleman wrote in a note.

Coleman now projects adjusted EPS of $0.34 in 2016, in line with management's forecast, and up from his prior loss estimate of $2.88 per share.

"Our estimate assumes improving volume and pricing in the Flat-Rolled and European segments, as well as continued cost-cutting, partly offset by weakness in the Tubular division," Coleman highlighted.

The analyst also raised his 2017 estimate to earnings of $4.00 per share from a loss of $0.47 per share. Coleman's long-term earnings growth rate forecast is being raised to 8 percent from 5 percent.

U.S. Steel shares have recently shown relative strength, rising 24.1 percent over the past quarter while the S&P grew 3.7 percent. The shares have also outperformed over the past year, rising 41 percent versus a gain of 4 percent for the benchmark index. The beta on the shares is 2.3.

"U.S. Steel shares have shown strong momentum in recent months, but we think there is more room to run. Our target price of $30, combined with the dividend, implies a projected 2017 P/E of 7.5 and a total potential return of 18% from current levels," Coleman added.

At time of writing, shares of U.S. Steel rose 2.28 percent to $26.07.