Skip to main content

Market Overview

BofA Cuts US Steel's Price Target To $3

BofA Cuts US Steel's Price Target To $3

United States Steel Corporation (NYSE: X) shares dropped another 5% on Monday to under $5.50, but one analyst said the stock still has nearly 50% downside remaining.

The US Steel Analyst

Bank of America analyst Timna Tanners reiterated her Underperform rating for U.S. Steel and cut her price target from $4 to $3.

The US Steel Thesis

Tanners said U.S. steel’s Friday announcement of additional furnace closures, a $125 million capex delay and an $800 million drawdown on its revolver are further signs the company is facing an unprecedented situation. Tanners estimates U.S. Steel now has just $724 million remaining in revolver capacity and $2.3 billion in total liquidity.

Tanners said U.S. Steel’s cost cutting measures will help, but steel prices remain in freefall given demand has been decimated by coronavirus (COVID-19) economic shutdowns.

See Also: 8 Best Investment Strategies During A Recession

“We recently cut volumes 10% for U.S. steel mills in Q2E/Q3E to factor in a recession, which assumes a modest drop in auto demand, on top of sharply lower energy and distributor buying,” Tanners wrote in a note.

Bank of America’s cash burn forecast suggests U.S. Steel will need a full drawdown of its revolver in 2021. Tanners also cut her 2020 EPS estimate from a $3.30 loss to a $3.80 loss and her 2021 estimate from a $2.40 loss to a $3.30 loss.

For steel investors looking for a safe haven during the economic slowdown, Tanners said she prefers Buy-rated Commercial Metals Company (NYSE: CMC) or Neutral-rated Reliance Steel & Aluminum Co (NYSE: RS).

Benzinga’s Take

Companies with weak balance sheets are most at risk during the COVID-19 outbreak. Given U.S. Steel’s challenged balance sheet, the lack of clarity on steel demand and Tanners’ projected $1.7 billion in cash burn through 2022, U.S. Steel appears to be an extremely high risk investment at this point.

Do you agree with this take? Email with your thoughts.

Latest Ratings for X

May 2021Credit SuisseUpgradesUnderperformOutperform
Apr 2021Goldman SachsInitiates Coverage OnNeutral
Mar 2021Argus ResearchDowngradesBuyHold

View More Analyst Ratings for X
View the Latest Analyst Ratings


Related Articles (X)

View Comments and Join the Discussion!

Posted-In: Bank of America Coronavirus Covid-19 Timna TannersAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga

Latest Ratings

CMRXHC Wainwright & Co.Maintains18.0
PZZAStephens & Co.Maintains115.0
STAACanaccord GenuityMaintains150.0
DGIICanaccord GenuityMaintains25.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at