Nomura Lowers Price Target On United States Steel On 2015 Guidance

In a report published Thursday, Nomura analyst Curt Woodworth reiterated a Buy rating on

, but lowered the price target from $55.00 to $37.00. In the report, Nomura noted, “US Steel has significantly exceeded earnings guidance in each of the past four quarters and consequently has established a track record of conservatism. We expect the market to be skeptical of the guidance given the continued decline in sheet prices and expectations for scrap to fall by $30-40/ton in Feb. We believe it is important for investors to understand that iron ore accounts for only ~13% of US Steel's Flat Rolled cost base and X should see significant benefits in 2015 from lower natural gas, coke, and scrap prices. In addition, we project that US Steel should be able to generate an incremental $200mn of realized project Carnegie savings relative to the 4Q-14 run rate; note X achieved $575mn of benefits in 2014. US Steel's flat rolled ASPs have been very stable over the past several years owing to continued improvements in product mix and success in maintaining price levels for OEM contracts, as was very evident in 4Q-14.” United States Steel closed on Wednesday at $23.58.