On Feb 6, Zacks Investment Research upgraded steel company
U.S. Steel Corporation
) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
U.S. Steel, on Jan 27, recorded adjusted earnings of 27 cents
per share in the fourth quarter of 2013 against a loss of 41
cents in the year-ago quarter.
For first-quarter 2014, the company expects total reportable
segment and other business income from operations to increase
moderately compared to the fourth quarter.
U.S. Steel is looking for opportunities related to the
availability of reasonably priced natural gas as an alternative
to coke in the iron reduction process to improve its cost
competitiveness while reducing its dependence on coal and coke in
the long term. The company is also expanding its coke-making
capabilities. It has taken a number of steps in order to ensure
long-term access to high quality coke for its blast furnaces.
U.S. Steel is actively engaged in boosting its position in the
energy tubular markets. We note that the shipments of the
company's proprietary semi-premium connection increased by nearly
70% in 2013. Moreover, the company continues to introduce new
semi-premium and premium connections into the market. These
initiatives will enable U.S. Steel to develop connections and
capture the significant margin opportunities tied to these highly
U.S. Steel expects strong demand in the automotive space. The
company had entered into a collaboration agreement with specialty
Carpenter Technology Corporation
) to develop lighter high-strength steel for automotive
applications in early 2013. The focus of the partnership will be
fuel economy and passenger safety.
Moreover, 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) which will possess superior strength, flatness and
formability that were earlier not available at these levels.
These better-quality steels offer customers critical design
solutions as automotive companies minimize the weight of
component materials to improve fuel economy while assuring
The funded status of U.S. Steel's pension and OPEB plans has
improved significantly due to the economic recovery. U.S. Steel's
total unfunded status at the end of 2013 was $2.5 billion, a $2.4
billion improvement from $4.9 billion at the end of 2012. Pension
and OPEB obligations are a significant part of the company's cost
and capital structure and U.S. Steel expects its costs to be down
over $100 million year over year in 2014.
In addition, U.S. Steel is actively engaged in improving its cost
structure and increasing revenues on a sustainable basis through
its "Project Carnegie" initiative.
Other Stocks to Consider
Other players in the steel industry worth considering are
Companhia Siderurgica Nacional
) with both holding a Zacks Rank #1 (Strong Buy).
CARPENTER TECH (CRS): Free Stock Analysis
ARCELOR MITTAL (MT): Free Stock Analysis
CIA SIDERUR-ADR (SID): Free Stock Analysis
UTD STATES STL (X): Free Stock Analysis
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