What Is The Upside To U.S. Steel If Its Tubular Segment Reaches Its Historic Highs?

-11.73%
Downside
40.78
Market
36.00
Trefis
X: United States Steel logo
X
United States Steel

U.S. Steel‘s (NYSE:X) tubular segment has shown significant growth in 2017 with its revenue growing by 123% in the first 9 months compared to the same period last year. Recovery in global crude oil prices has supported the revival of the shipment volume and price realization of the company’s Tubular segment which, in turn, has resulted in higher revenue realization. With the Organization of the Petroleum Exporting Countries (OPEC)’s decision to keep their production cuts intact through 2018, we anticipate this division to show further recovery over our forecast horizon.

We have created an interactive model which summarizes the impact of a rise in the revenue of the Tubular segment of U.S. Steel on its share price. The U.S. oil rig count rose by 12 last week as per the latest data released by Baker Hugues, which is the biggest weekly increase since 2017. In such a scenario, it is possible that U.S. Steel’s tubular segment reaches its 2012 highs over the span of the next four years (including 2018). This would create a 7% upside to our current price estimate for U.S. Steel as elaborated below.

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You can view and modify our assumptions by using our interactive platform.

However, with an increase in the U.S. shale output, there is a greater possibility of oil being pushed down to its previous lows despite the effort of production cuts initiated by OPEC and its allies. U.S. crude production currently sits at 9.88 million barrels a day (BPD). This, in turn, would lead to a downside to the Tubular segment of U.S. Steel in contrast to our above scenario.

We have $38 price estimate for U.S. Steel which is 9% below the market.

Have more questions about U.S. Steel? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking and encourages readers to comment and ask questions in the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for U.S. Steel

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