Shares of United States Steel Corp. (X) hit a new 52-week high of $30.47 on Dec 30 and eventually closed at $29.52.
Year-to-date, U.S. Steel’s share price recorded a healthy return of 24.86%. The company’s long-term estimated earnings per share (EPS) growth rate is 14.4%. Average volume of shares traded over the last three months was approximately 7,147K.
What is Driving U.S. Steel Up?
U.S. Steel is actively engaged in improving its cost structure and sustainably increasing revenues through its “Project Carnegie” initiative, which includes measures like shutdown of operations. These efforts are expected to deliver over $75 million in cost improvements annually.
U.S. Steel is considering an expansion of its iron ore pellet operations at the Keewatin, Minn. (Keetac) facility, which will increase production capability by approximately 3.6 million tons, thereby augmenting its iron ore self-sufficiency. The company is also examining alternative iron and steel making technologies such as gas-based, direct-reduced iron and electric arc furnace (EAF) steel making.
U.S. Steel is experiencing strong demand in the automotive space. In early 2013, the company collaborated with specialty alloy maker Carpenter Technology Corporation (CRS) to develop lighter high-strength steel for automotive applications. The collaboration will lead to growth opportunities in the automotive market.
Further, U.S. Steel and Japan’s Kobe Steel, in May 2013, commissioned a new continuous annealing line at their joint venture PRO-TEC Coating Company. The 500,000-ton PRO-TEC continuous annealing line will produce the next generation of Advanced High Strength Steels (AHSS) and Ultra High Strength Steels (UHSS) having the superior strength, flatness and formability which were earlier unavailable at these levels. These better-quality steels will offer the customers critical design solutions as automotive companies minimize the weight of component materials to improve both strength and fuel economy for ensuring passenger safety.
Several steps have been taken by U.S. Steel to gain long-term access to high quality coke for its blast furnaces. The company is in the process of constructing a technologically and environmentally advanced battery at the Clairton Plant.
U.S. Steel also signed a 15-year coke supply agreement with Gateway Energy & Coke Company, LLC (Gateway) in connection with its 650,000 ton per year heat recovery coke plant which is located at Granite City Works. Further, the company is in the process of constructing a carbon alloy facility at Gary Works which will utilize state-of-the-art technology for producing a carbon alloy material to be used as a coke substitute. With the Flat-rolled division’s coke-making facilities and the Gateway long-term supply agreement, it has the capability to be nearly self-sufficient in terms of annual coke requirements at normal operating levels.
Other Stocks to Consider
U.S. Steel currently carries a Zacks Rank #2 (Buy). Other players in the industry, which look attractive at current levels, are Companhia Siderurgica Nacional (SID) and AK Steel Holding Corporation (AKS). While Companhia Siderurgica Nacional holds a Zacks Rank #1(Strong Buy), AK Steel has a Zacks Rank #2.
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