The firm reiterated its "buy" rating and $9 price target on the sixth-largest U.S. steelmaker based on improved global electrical steel demand, declining iron ore costs, and better free cash flow as estimated 2015 project spending winds down.
"Last week we hosted CFO Roger Newport in investor meetings with New York, where he was upbeat that the recent $20/ton price hike was sticking and more could follow," the firm wrote in a research note.
"Contract prices for AK have yet to reflect the YTD drop in spot prices, and when volumes improve in H2 as we expect, prices may fall with more commodity grade tons as costs fall on greater utilization," BofA/Merrill continued. "He also spoke confidently about trade cases being filed (against sheet imports), and said they could be filed independent of separate legislation aiming to lessen the proof of injury standard in the process."
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 largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- X, with its decline in revenue, slightly underperformed the industry average of 18.2%. Since the same quarter one year prior, revenues fell by 26.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- X's debt-to-equity ratio of 0.96 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.88 is weak.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. 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 6.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.29% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $136.00 million or 76.14% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: X Ratings Report