J.P. Morgan Lowers PT On X To $68

J.P. Morgan is lowering its price target from $76 to $68 on U.S. Steel Corp. X in light of poor pricing and demand as of late. Says J.P. Morgan, in the report, “We are lowering our estimates and target for U.S. Steel but remain Overweight on the stock based on our view that bottoming steel prices and worsening sentiment suggest a positive risk/reward balance at current levels. Specifically, we expect pricing to find support soon after the $180/ton drop in spot HRC prices from the April peak given the high raw material cost-push pressures and as narrowing spreads between U.S. and foreign steel prices lower imports and encourage U.S. exports – especially as Japan enters its reconstruction phase. Steel investor and buyer sentiment also appears battered, based on X's underperformance and current steel purchasing habits & low inventories. Notably, amidst this choppy demand & pricing environment the company continues to improve its cost basis in the near term by pursuing coal substitution through PCI and natural gas injection. Longer term the company could expand its valuable captive iron ore assets and further reduce coal/coke consumption through potential DRI units and even EAFs. X currently trades at 4.4x our 2012E EBITDA.” As mentioned above, J.P. Morgan remains Overweight on the stock. X closed yesterday at $40.62.