Will This Downgrade Hurt US Steel (X) Today?

Story updated at 9:40 a.m. to reflect market activity.

NEW YORK (TheStreet) -- US Steel (X) was downgraded to "underperform" from "neutral" by Credit Suisse Friday.

Shares of US Steel fell 1.8% to $23.95 in morning trading.

The analyst firm set a price target of $19 for the steel producer. According to Credit Suisse's analysts emerging market demand is a drag for the entire industry.

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Separately, TheStreet Ratings team rates UNITED STATES STEEL CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate UNITED STATES STEEL CORP (X) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and weak operating cash flow."

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

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • UNITED STATES STEEL CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, UNITED STATES STEEL CORP reported poor results of -$11.68 versus -$0.97 in the prior year. This year, the market expects an improvement in earnings ($1.63 versus -$11.68).
  • X, with its decline in revenue, underperformed when compared the industry average of 8.4%. Since the same quarter one year prior, revenues slightly dropped by 4.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The debt-to-equity ratio of 1.18 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 0.85, 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.
  • You can view the full analysis from the report here: X Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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