Shares of United States Steel Corp X 5.94% plunged more than nine percent on Friday after Goldman Sachs analysts reduced its iron ore outlook for 2015, lowering the forecasted price from $80 to $66 per metric ton.
Shares of U.S. Steel finished the week at new 52-week lows, but the stock erased all of last Friday’s losses during after-hours trading Tuesday on the announcement a big Q4 earnings beat. Analysts recently seem to be very polarized on what investors should expect from the stock for the rest of 2015.
Not surprisingly, Goldman Sachs analysts followed up their downward adjustments to iron ore prices with a downgrade of U.S. Steel’s stock on Friday from Buy to Neutral. Goldman reduced their price target for U.S. Steel down to $23.00. Goldman predicts a 30 percent reduction in energy and petroleum capex, which will materially impact steel demand.
Citigroup analysts made a similar prediction about the iron ore market and its impact on U.S. Steel back in November. Citi forecast that iron ore would dip below $60 per ton in 2015. They maintained their Sell rating on U.S. Steel and issued a price target of $22.00 for the stock.
While Goldman Sachs and Citigroup see U.S. Steel staying in the low $20’s throughout 2015, other analysts have an extremely optimistic outlook. Earlier this month, Deutsche Bank reiterated their Buy rating on U.S. Steel and set a $55.00 price target for the stock, a 167 percent upside from last week’s closing price.
Also this month, Morgan Stanley laid out their bullish case for U.S. Steel, praising their commitment to cost-cutting and their strong domestic pricing power. Morgan Stanley has a $60 price target for the stock, a 192 percent upside from Friday’s closing price.
Big Earnings Beat
U.S. Steel reported a big earnings beat Tuesday, handily topping consensus expectations by reporting earnings of $1.83 per share and revenue of $4.07 billion for the quarter. Shares spiked nearly nine percent in after-hours trading on the news. Bulls may be celebrating for now, but only time will tell if the bulls or the bears (or neither) will be celebrating by the time 2016 rolls around.
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