United States Steel Corporation (X) Needs Transparency and Consistency

United States Steel Corporation (NYSE: X) stock has been trending lower ever since the company reported a big second-quarter earnings beat on July 25. Despite some encouraging internal business developments under new CEO Dave Burritt, investors have been focused on comments from President Donald Trump related to an ongoing investigation into steel imports.

In a research note on Thursday, Barclays analyst Matthew Korn says Burritt got off to a strong start in the second quarter, and his leadership and transparency seem to have the company well-positioned for the future.

“Long term, X has the chance to gain investors’ goodwill by building on the improved transparency and ‘substance over style’ approach that Mr. Burritt appears to favor,” Korn says in the note. “It’s encouraging to see the additional detail on the asset revitalization program’s budget, time frame, project list and quantitative goals – details not seen under previous leadership.”

Despite the improvements that Korn noted, steel investors have been preoccupied with Trump’s ongoing investigation into whether or not he should exercise a rare power under Section 232 of the Trade Expansion Act of 1962 and restrict U.S. steel imports. Section 232 grants the president power to modify U.S. trade policy should the Commerce Secretary deem U.S. steel imports a threat to national security.

Domestic steel stocks, including U.S. Steel, AK Steel Holding Corp. (AKS) and Nucor Corp. (NUE), could see a major jump in steel prices if Trump restricts imports. However, recent comments by the president suggest that outcome is extremely unlikely, at least for now.

Despite admitting that U.S. steel companies are facing a “very unfair situation,” Trump told the Wall Street Journal on July 25 that import restrictions are not a priority for the administration. “We don’t want to do it at this moment,” he said.

Trump’s comments led Longbow Research analyst Chris Olin to downgrade U.S. Steel and AK Steel from “buy” to “neutral” on July 27. Olin said there is now just a 50 percent chance of a positive outcome from the Section 232 investigation.

“Over the past few days, industry contacts suggested the channel returned to business as usual, with customer orders and price expectations turning flattish,” Olin wrote.

For now, Korn says…

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