Morgan Stanley cuts rating on U.S. Steel stock to 'equal-weight'

Investing.com -- Morgan Stanley downgraded United States Steel Corporation (NYSE: X) "Equal-Weight" from "Overweight" citing the stock's current valuation, which is near its standalone price target of $39 per share.

The brokerage noted U.S. Steel's strategic investments at its Big River facility, projecting EBITDA growth from $1.37 billion in 2024 to $2.31 billion in 2026, with free cash flow turning positive over the same period. However, analysts no longer see significant upside based on a standalone valuation.

A potential deal with Japan's Nippon Steel or another suitor remains possible, Morgan Stanley (NYSE: MS) noted, with a bull-case scenario valuing the stock at $55 per share.

“While we still see the merits of US Steel's growth projects, we think much of the transformation is now priced in with the stock trading very close to our standalone valuation and the risk-reward being more balanced,” analyst at Morgan Stanely said.

Morgan Stanley expects steel prices to improve in 2025, driven by trade protectionist measures anticipated under a possible second Trump administration and modest demand growth of 1.6%.

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