U.S. Steel Shares Looking Overbought After A 60% Rise Since The Election

Argus has downgraded United States Steel Corporation (NYSE: X) to Hold from Buy following the stock’s 60 percent rally since the election.

Trump, Steel And Infrastructure Spending

U.S. Steel should benefit from the Trump administration’s plans to boost infrastructure spending and limit the dumping of imported low-cost steel as these steps provide greater pricing power over time.

The company swung to an adjusted profit in the third quarter, as higher steel pricing and reduced imports of low-cost steel more than offset the impact of unexpected outages at several manufacturing plants.

“Although U.S. Steel should benefit over time from the Trump administration’s plans to increase infrastructure spending, we do not expect to see a significant impact on earnings until at least mid-2017,” analyst David Coleman wrote in a note.

Analyst's Take

As such, Coleman feels the shares now appear overbought, with signs that price momentum is slowing, if not stopping.

That said, Coleman believes that U.S. Steel and its peers still face significant uncertainty in the near term.

Could Become More Bullish If...

Coleman would become more constructive on the stock when it pulls back to $25 range or the company shows faster-than-expected acceleration in earnings. The analyst still expects an adjusted loss of $1.46 per share in 2016, but predicts an EPS of $1.31 in 2017.

Shares of U.S. Steel closed Monday’s trading at $32.17. In the pre-market hours Tuesday, the stock fell 5.25 percent to $30.48.