US Steel Shares Drop After Gordon Johnson Issues Sell Rating

United States Steel Corporation X stock was hit hard Tuesday after a bearish initiation from one of the most well-known steel analysts on Wall Street.

The Analyst

Vertical Research Group analyst Gordon Johnson initiated coverage of U.S. Steel with a Sell rating and $25 price target.

The Thesis

Investors are paying too much attention to current steel prices and President Donald Trump’s potential Section 232 decision and not enough attention to underlying market fundamentals, particularly in China, Johnson said. 

A number of factors — Chinese infrastructure, fixed asset investment growth, Chinese credit growth and further fiscal and monetary stimulus — are more important in predicting near-term shifts in steel prices, the analyst said. 

Investors are hoping for a favorable decision from Trump, who recently imposed a 30-percent import tariff on solar panels.

U.S. Steel stock is up 68 .5 percent in the past six months, but Johnson said in December that much of U.S. Steel’s recent outperformance is due to investor confusion about an accounting change included in the company’s most recent earnings report and optimism about the U.S. Commerce Department’s aggressive tariff ruling on Vietnamese steel imports. 

U.S. Steel reports fourth-quarter earnings after the close Wednesday, Jan. 31. 

Price Action

U.S. Steel stock was down 6.17 percent Tuesday afternoon following the downgrade, but the stock remains up 10 percent in January.

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