United States Steel Corporation (NYSE:X) — It may not be as big as 50 years ago, but “Big Steel” still is a major producer of a wide variety of steel plate, sheet, tubular, and tin products in North America and Europe.
Sales are forecast to be down 10% this year, but Standard & Poor’s expects a rebound of 10%-plus in 2017. Earnings this year are expected to be at a loss of $2.15, but analysts expect a rebound in 2017 to $1.35. S&P increased their estimate for 2017 by 5 cents due to the Donald Trump plan to increase tariffs on imports along with an increase in demand from infrastructure support.
Significant demand for steel encouraged S&P to raise its 12-month target by $12 to $38. And yesterday Morgan Stanley’s analyst commented that U.S. Steel demand could increase by 20% from the Trump Infrastructure Plan.
On the victory of the president-elect, U.S. Steel executed a 2½ point break-away gap from $21.40, followed by a minor Continuation Gap from $29 to $29.50. The stock hit a high of $39.14 five sessions ago and has since retrenched on profit-taking to a support line at $34.
Overall “X” has broken from a four-month saucer with convincing strength. But profit-taking may drive it back to the support line at $34-$35, and that is where I suggest buying it. Technically, this formerly out-of-favor, old-line manufacturer could produce a trade to $42 for a proposed gain of 20%. U.S. Steel is also a good long-term investment since the rehabilitation of North America’s infrastructure will take years to accomplish and U.S. Steel could be a long-term beneficiary.
