US Steel (X) Buy Rating Reiterated at Goldman Sachs

Goldman Sachs reiterated a Buy rating on US Steel (NYSE: X) with a price target of $47. Analyst Sal Tharani called it one of the best growth stories in his steel coverage.

"We believe that US Steel is one of the best growth stories in our steel coverage with an EBITDA CAGR of 26% from 2013 to 2016E. It is also one of the cheapest stocks in our coverage, trading at 4.5X 2015E adj. EBTIDA compared to its peer average of 6.5X. Yet, in our view, it has been the most misunderstood story. We believe this is on the verge of changing," said Tharani.

"Despite a solid beat in its Flat Rolled (FR) Division in 2Q, we estimate operating income in this segment will further increase 8X in 3Q. We had estimated that X could cut $750mn in costs at FR (see Opportunity to cut significant fat—at least $1bn in cost savings; Buy dated 2/6/14). So far it has announced $435mn of total cost cuts with 61% or $265mn at FR. This would leave about $485mn of potential remaining cost reductions in FR. We have since become more positive, given our previous estimates did not include any cost reductions at X’s other businesses, which leads us to believe that our estimate of $750mn in cost savings at FR could prove to be low," he added.

For an analyst ratings summary and ratings history on US Steel click here. For more ratings news on US Steel click here.

Shares of US Steel closed at $34.84 yesterday.

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