Why United States Steel (X) is Scaling Higher

NEW YORK (TheStreet) -- United States Steel (X) is scaling higher following an upgrade from BMO

The investment bank upgraded the steel producer to "outperform" from "market perform" as the benefits from higher steel pricing and lower input costs for met coal continue to be felt. 

In pre-market trading, shares have gained 1.5% to $28.35.

TheStreet Ratings team rates UNITED STATES STEEL CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate UNITED STATES STEEL CORP (X) a SELL. This is driven by several 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 feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • UNITED STATES STEEL CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, UNITED STATES STEEL CORP reported poor results of -$0.97 versus -$0.59 in the prior year. For the next year, the market is expecting a contraction of 30.9% in earnings (-$1.27 versus -$0.97).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 4170.4% when compared to the same quarter one year ago, falling from $44.00 million to -$1,791.00 million.
  • The debt-to-equity ratio is very high at 2.22 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, X maintains a poor quick ratio of 0.81, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, UNITED STATES STEEL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $37.00 million or 61.85% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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