United States Steel Corporation (NYSE:X) — Despite the manufacturing prowess of this household name in the steel industry, the cyclical nature of its business and headwinds such as exposure to imported steel, a strong U.S. dollar and weak oil prices have resulted in an earnings squeeze and five years of losses.
However, the company turned a profit in 2014, reporting full-year net income of $102 million, or $0.69 per share. Furthermore, Q4 earnings of $1.83 per diluted share trounced estimates of $0.87.
S&P Capital IQ, which has a “strong buy” rating and 12-month target of $33 on X stock, highlighted the company’s ability to control costs and its quick response to weak markets by placing some plants on hold.
Analysts at Credit Suisse Group AG (ADR) (NYSE:CS) applauded the company’s strategy of adjusting output to match market requirements. They have an “outperform” rating on X stock with a $50 target price.
While earnings are expected to fall this year, analysts estimate a rebound in 2016. With an increase in demand for steel from the auto industry, the recovery in non-residential construction, and an eventual return to higher oil and gas prices, current earnings projections and price targets could prove conservative.
Technically, X stock flashed twin buy signals from my proprietary indicator, the Collins-Bollinger Reversal (CBR), which were accompanied by high volume.
On Wednesday, the stock flashed a buy from the MACD indicator and is challenging its 50-day moving average and bearish resistance line, both at $24.26. A close above this resistance should result in a trade to $30 within six weeks, which is nearly 25% above current prices.
Long-term investors should consider buying X stock at the current price and holding it for a 12-month price target of $38 to $40.
