Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why U.S. Steel Might Be Poised to Pull Back

By Brian D. Pacampara, CFA - Oct 30, 2013 at 11:27AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Does this analyst make a good case? Or is it just more noise from Wall Street?

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of U.S. Steel ( X -0.40% ) slipped 1.5% this morning after Deutsche Bank downgraded the steel company from buy, to hold.

So what: Along with the downgrade, analyst David Martin planted a price target of $26 on the stock, representing about 2% worth of upside to yesterday's close. While momentum traders might be attracted to U.S. Steel's 9% earnings-related pop yesterday, Martin believes that all of its efficiency improvements are now baked well into the valuation.

Now what: Deutsche thinks that ArcelorMittal ( MT -2.63% ) and Steel Dynamics ( STLD -1.10% ) offer better risk/reward trade-offs in the steel space. Needham noted:

Corporate initiatives announced are + and its shares have now risen ~45% in 6 mths partially in anticipation of the moves. Other + factors are HRC prices, pension benefits & trade cases. We believe these & further cost initiatives are understood or priced-in.

With U.S. Steel still trading at a clear price-to-sales discount to the industry, however, I wouldn't bet on too big of a pullback.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

ArcelorMittal Stock Quote
$27.41 (-2.63%) $0.74
Steel Dynamics, Inc. Stock Quote
Steel Dynamics, Inc.
$58.94 (-1.10%) $0.66
United States Steel Corporation Stock Quote
United States Steel Corporation
$22.29 (-0.40%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/03/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.