Shares of United States Steel Corp. (X) climbed as much as 4.22% Monday, reaching a session high of $19.75 on strong volume after the company's shares were reiterated with an "overweight" rating by analysts at JPMorgan.
In a note to investors on Monday, JPMorgan said that the stock's recent decline created a buying opportunity. "We reiterate our 'overweight' rating on U.S. Steel as we believe the structural changes in the steel industry and the re-pricing of 40% of U.S. Steel's Flat Rolled shipments continue to be under-appreciated by the market," JPMorgan stated. (See also: Assessing United States Steel's Valuation.)
U.S. Steel shares have fallen some 34% through last Thursday from when the shares traded at around $27 in July. The analysts reminded that not only are the company's fundamentals still intact, but U.S. Steel stands to gain from the supply cuts that caused steel stocks to rally earlier this year.
The U.S. International Trade Commission recently launch an investigation into what many U.S.-based steel producers perceived as unfair trade practices by China. Last week the Commerce Department revealed its preliminary finding that Chinese imports of stainless steel sheet and strip were flooding U.S. markets at below fair value.
JPMorgan also addressed the issue of oversupply in the market, pointing out that the Chinese government is looking to consolidate steel companies, which the firm believes will lead to capacity rationalization. A normalization within the market in terms of price and capacity would bode well for domestic steel producers like U.S. Steel since steel prices will improve amid higher demand. (See also: U.S. Steel at Cusp of Multiyear Uptrend.)
The sharp decline in U.S. Steel shares prompted Credit Suisse analysts last Friday to reiterate its "outperform" rating on the shares. Credit Suisse also placed a $29 price target on the stock, which implies potential premiums of around 48% from Monday's close of $19.55.
U.S. Steel shares have risen 145% year-to-date and 81% over the past twelve months, compared with a 5% year-to-date rise in the S&P 500 (SPX) index.
Read more: United States Steel Upgraded By JPMorgan (X) | Investopedia http://www.investopedia.com/news/united-states-steel-upgraded-jpmorgan-x/#ixzz4LWATZRD1
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