U.S. Steel is a Pittsburgh-based steel producer.
Oil prices have tumbled as concerns about the global supply glut persist, with Brent crude hitting an 11-year low last Tuesday.
High-margin products used by oil and gas companies had previously protected steel producers from the downturn in construction and similar industries, according to Bloomberg.
So far this year, the price of hot-rolled steel coil, a benchmark product, has lost 38%, according to The Steel Index, Bloomberg notes.
As demand has waned, U.S. steel mills operated at merely 61% during the week ending December 21, Bloomberg reports. Inventories remain stocked for longer as the energy industry struggles and demand slumps.
Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate UNITED STATES STEEL CORP as a Sell with a ratings score of D. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio of 1.10 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, X maintains a poor quick ratio of 0.75, which illustrates the inability to avoid short-term cash problems.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, UNITED STATES STEEL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for UNITED STATES STEEL CORP is currently extremely low, coming in at 6.22%. It has decreased from the same quarter the previous year.
- X's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 67.20%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- UNITED STATES STEEL CORP has improved earnings per share by 16.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, UNITED STATES STEEL CORP turned its bottom line around by earning $0.63 versus -$11.68 in the prior year. For the next year, the market is expecting a contraction of 482.5% in earnings (-$2.41 versus $0.63).
- You can view the full analysis from the report here: X