What’s Happening With U.S. Steel Stock?

U.S Steel (NYSE:X) posted a better-than-expected set of Q1 2023 results in late April, although revenues and earnings declined year-over-year due to weaker pricing. While the company’s revenues for the quarter came in at about $4.47 billion, marking a decline of 14.5% versus last year, adjusted earnings stood at $0.77 per share, down from $3.11 per share in the year-ago period, due to a sharp decline in profits from the flat-rolled, mini-mill and U.S. Steel Europe segments. That said, things are likely to look up for the company in Q2.

During the first quarter, the company’s flat-rolled product segment – which accounted for almost 60% of total revenues in 2022 –  saw average price realizations decline by almost 26% year-over-year to $1,012 per ton, due to a tough comparison with last year when the start of the Ukraine war saw steel prices  surge. However, production picked up meaningfully, as the company restated blast furnaces at  Mon Valley and Gary Works with shipments rising 17% to 2.28 million tons. In Europe, which is the company’s second-largest segment by revenue, prices contracted by about 18% to an average of $909 per ton, with production also declining. That being said, things appear to be looking up in the region as the company indicated that it had recently restarted two blast furnaces on account of an improving order book. Things should look up for the company during the second quarter as production and pricing pick up. In April, steel prices recovered to their highest level since June 2022. The company has guided for an adjusted EBITDA for the second quarter in the range of between $750 million to $800 million, up from about $427 million in 2022.

So is U.S. Steel stock a buy at current levels of about $22.50 per share? While there are some macro headwinds, including high-interest rates which could weigh on steel demand and investments, the U.S. government has been increasingly incentivizing U.S. manufacturing, while spending on infrastructure. This should be positive for the steel industry. We value X stock at about $27 per share, roughly 20% ahead of the current market price. See our analysis of U.S. Steel Valuation for more details on what’s driving our valuation for U.S. Steel and how it compares to peers. Also, check out our analysis of U.S. Steel Revenues.

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