US Steel Q4 Earnings Preview: All Eyes On Nippon's $14.1 Billion Deal

United States Steel Corp X will be reporting its fourth-quarter earnings on Feb. 1. Wall Street expects 26 cents in EPS and $3.76 billion in revenues as the company reports after market hours.

The Pittsburgh-based company’s stock is up about 70% over the past year.

Related: US Steel Shares Outperform S&P 500 – Deliver 30% Higher Returns In Single Year

U.S. Steel has been under scrutiny since Dec. 18, when a proposed acquisition by Nippon Steel Corp NISTF in a $14.1 billion deal.

President Joe Biden‘s economic advisors are suggesting that U.S. Steel may need to increase support for organized labor to finalize its acquisition deal.

Meanwhile, an investigation led by former Louisiana Attorney General Charles C. Foti, Jr. and Kahn Swick & Foti, LLC, is also assessing whether the proposed sale of United States Steel, where shareholders receive $55 per share, is fair or undervalues the company.

Here's what analysts will be focusing on, and how the stock currently maps against Wall Street estimates.

U.S. Steel Investment Thesis 

U.S. Steel is a major global steel company, with a 79% revenue from the U.S. and 21% from Europe. Nippon’s $55/share acquisition offer comes at a 40% premium. Financially sound, U.S. Steel has $3.22 billion cash on its balance sheet against $4.16 billion total debt.

Despite its sound financials, U.S. Steel is considered a speculative bet, many material sector investors prefer Nucor Corp NUE. Nucor offers 100% exposure to the U.S. with better margins, while Nippon trades at lower multiples and has a global reach.

Considering potential US economic downturn and geopolitical risks, defense industry dynamics may act as a tailwind for the stock. However, uncertainties in the EU present challenges.

U.S. Steel Analysts' Focus Consensus Ratings

Q4 Analysts' Focus: Analysts would be awaiting U.S. Steel management’s view and plans regarding the proposed Nippin deal. As the path ahead for this deal remains uncertain, analysts would likely be accounting for a greater margin of safety when it comes to U.S. Steel stock.

Ratings & Consensus Estimates: Consensus analyst ratings on U.S. Steel stock stand at a Neutral currently with a price target of $27.95. JP Morgan recently initiated coverage on the stock with a Neutral rating and a price target of $52 a share.

X Price Action: U.S. Steel stock was trading at $48.30 at the time of publication.

Read Next: Larry Summers Backs Nippon’s Acquisition Of US Steel Corp Amid Team Biden’s Opposition: ‘Protectionist Pandering With No Genuine National Security Rationale’

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