Why U.S. Steel (X) Stock Is Higher Today

NEW YORK (TheStreet) -- Shares of U.S. Steel Corp.  (X) are up 7.10% to $44.35 in pre-market trade after the integrated steel producer said its Canadian unit would apply for bankruptcy protection, as the 113-year-old steelmaker seeks to stop the bleeding after five straight years of losses, the Wall Street Journal reports.

The company, which faces challenges including high-cost mills, labor liabilities, and competition from imports, also said it was canceling over $800 million worth of expansion projects in Minnesota and Indiana, the Journal said.

U.S. Steel Canada is seeking a court order allowing it to operate while exploring restructuring alternatives. U.S. Steel Corp. has agreed to provide $168.5 million)of financing to support current operations through the end of 2015.

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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 solid stock price performance, good cash flow from operations and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and generally higher debt management risk."

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

  • Powered by its strong earnings growth of 77.77% and other important driving factors, this stock has surged by 97.81% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Net operating cash flow has significantly increased by 418.54% to $783.00 million when compared to the same quarter last year. In addition, UNITED STATES STEEL CORP has also vastly surpassed the industry average cash flow growth rate of -10.41%.
  • 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 ($2.10 versus -$11.68).
  • 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.
  • The gross profit margin for UNITED STATES STEEL CORP is currently extremely low, coming in at 6.89%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.40% is significantly below that of the industry average.
  • You can view the full analysis from the report here: X Ratings Report
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