Axiom Capital Sees Challenges Ahead For United States Steel Corporation

In a report published Tuesday, Axiom Capital analyst Gordon L. Johnson II reiterated a Sell rating and $21.00 price target on

. In the report, Axiom Capital noted, “While we believe many pundits see $1/shr in quarterly earnings for X as sustainable (or $4/yr in annual earnings × a 10x P/E multiple, justifying today's ~$40/shr stock price), should HRC prices fall back below $620/s. ton, we believe X would once again be at/below break-even on the bottom line; more specifically, with: (a.) inventories spiking (MSCI + steel mill inventories), (b.) scrap prices plummeting recently (increasing the competitiveness of the mini mills), (c.) imports into the U.S. rising to near all-time record levels, exacerbated by (d.) the increasingly bleak prospect of a U.S. trade case against foreign HRC producers (driving HRC imports higher), as well as our discussions w/ industry experts during our attendance at the 9/18 American Steel Distributors (ASD) meeting, we see HRC spot prices falling back to ~$620/s. ton by year-end ‘14; resultantly, we see X as among the better shorts in our metals & mining universe on the aforementioned trends.” United States Steel Corporation closed on Monday at $40.63.