Goldman Sachs Sees Little Upside On US Steel Following Earnings

Goldman Sachs is lowering its 1Q2011 estimate for US Steel

to a loss of $0.61 from a profit of $0.80, as it expects most of the price realization from rising spot prices to be delayed into later quarters. Along with higher steel price assumptions and delayed realization of prices by X, Goldman's 2Q/3Q EPS estimates rise to $1.57/$1.15 from $0.73/$0.57. Its FY2011 estimate remains the same at $2.50. Domestic Flat Rolled division's operating profit per ton for 2011 is now at $29, up from $23. Goldman has made other adjustments including tax rate, interest expense and, most markedly, has increased its pension and opeb expense to $590 mn in 2011 from $460 mn. This has resulted in a 10% increase in its adjusted EBITDA. These changes have raised the 6- month P/E, EV/EBITDA and M&A based TP to $61 from $54. Goldman maintains a Neutral rating on X. As steel prices are sustained over the next couple of months, Goldman believes US Steel should see more upside as investors see value in its vertical integration into iron ore. This should provide a short-term trading opportunity. Goldman maintains its Neutral rating on X as it sees more upside and a better opportunity in other Buy-rated names. X closed Tuesday at $57.30