Rosenfeld, the firm's oil services analyst, expects the number of rigs in the U.S. to increase to 889 in 2017 from 510 last year. That will require additional steel for drilling, translating to an earnings beat for U.S. Steel.
"Following revisions to our OCTG and flat rolled steel price forecasts and Tubular volumes, we increase X's 2017 EBITDA to $1,675M (+$405) and 2018 to $1,408M (+$351)," Rosenfeld wrote in a note. "An improved outlook for Tubular will contribute to positive guidance revisions for X. Based on recent spot steel prices, we estimate X will guide to 2017 EBITDA of $1.4-1.8B. On our 2017 Tubular EBITDA estimate of $177M, every +$100/t increase in OCTG metal spread contributes +$111M to EBITDA while utilization rates net +4% above base-case result in +$27M."