Steel prices are finally bottoming out. This is welcome news for steel makers, who saw demand dry up and their stock prices plummet after peaking in June 2008.
U.S. Steel (X) is sure to benefit. Its stock prices plunged over 70 percent in the past three years. Now, some analysts are predicting highly profitable future quarters for U.S. Steel as steel prices climb enough to make up for rising raw material costs.
The steelmaker has begun to bounce back. First quarter sales grew 25 percent to $4.9 billion from $3.9 billion a year ago. Earnings per share losses slowed to 60 cents, versus a $1.10 loss last year. Demand is rising for steel used to make farm equipment, railroad cars, barges, and other uses.
Once the world’s biggest supplier, U.S. Steel does face other challenges, though, such as foreign competitors in Brazil, Japan, and Russia. China currently produces nearly half the world’s crude steel.
Girded for growth
So, is U.S. Steel finally a buy? Of the 12 analysts listed on Thomson/First Call, one has a strong buy recommendation and four have buys, with five holds, one underperform, and one sell.
Deutsche Bank analysts recently upgraded U.S. Steel to a buy, citing rising steel prices and demand. Its price target also was raised to $56.
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