Analyst: For US Steel, Tariffs Are A Sell-The-News Event

The U.S. steel industry may have gotten a boost from President Donald Trump’s recently announced import tariffs on steel and aluminum.

The tariff announcement could be an excellent opportunity for investors to sell shares of United States Steel Corporation X, according to Vertical Group. 

The Analyst

Analyst Gordon Johnson downgraded U.S. Steel from Hold to Sell and cut the price target for the stock from $41 to $23.

The Thesis

The Section 232 bull case scenario is now played out, Johnson said in a Tuesday note.

With overwhelmingly bullish investor sentiment and the stock already up 58 percent in the past six months, Johnson said it’s difficult to make a case for further upside.

On Tuesday, U.S. Steel updated its 2018 EBITDA guidance in light of the new tariff — and Johnson wasn’t impressed. The company now expects fiscal 2018 EBITDA of $1.7 billion, up from previous guidance of $1.5 billion.

Johnson pointed out that U.S. hot rolled coil prices were just $706.50/s.t at the time the company issued its original guidance and are now $852.25/s.t.

“When considering the $200 million [addition] in incremental full-year 2018 EBTIDA guidance provided by X last night ... is less than the $224 million X guided us to for the ramp of 1.2M [million metric tons] at Granite City for half of 2018, we observe that without Trump’s 232 tariff, X would have actually cut its full-year 2018 EBITDA guidance last night,” Johnson said. 

Price Action

U.S. Steel stock plunged by 5.16 percent Tuesday morning following the downgrade.

Related Links:

US Steel Shares Drop After Gordon Johnson Issues Sell Rating

After Trump's Announcement Of Steel, Aluminum Tariffs, The Sell-Side Reacts