How Is U.S. Steel Likely To Grow In The Next Two Years?
U.S. Steel (NYSE: X) has seen a great degree of volatility in its stock price in recent months due to the great amount of speculation pertaining to the likely outcome of the ongoing trade war. Steel prices are expected to rise considerably post the implementation of the tariffs which are likely to benefit domestic steel producers like U.S. Steel. In this note, we elaborate on how we expect the company’s revenue is likely to grow over the next two years.
U.S. Steel’s flat-rolled division in the U.S. is likely to display the highest growth on the backdrop of favorable trade development in the U.S. for its domestic steel industry. However, the company’s shipments are expected to remain low due to the planned production outages at its operational facilities with the implementation of its asset revitalization program. This is expected to limit the company’s potential to fully benefit from higher steel prices. Nevertheless, the company has announced a restart of two blast furnaces and steelmaking facilities at the company’s Granite City Works this year which, in turn, would enable the company to compensate slightly for lost volume shipments through its production outages.
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The company’s Tubular segment is also expected to display consistent growth as oil drilling activity in the U.S. has been rising steadily with the recovery in crude oil prices. We expect this trend to continue in the near term, however, if the OPEC and the non-OPEC allies continue to raise their output, like their recent decision, global crude oil prices may get hurt, which, in turn, would have a detrimental impact on oil drilling activity in the U.S.
Focusing on U.S. Steel’s European division, the European Union (EU) currently holds the threat of being flooded with an increasing amount of cheap steel imports redirected from the U.S. as consequence of the increased tariffs imposed in the country. This may remain detrimental for the company’s European division which operates out of Slovakia. The EU is currently investigating the impact of the same and is expected to take provisional measures to protect its steel industry in the near term. Given such provisional measures are implemented, we expect the company’s European division to display a steady growth as the steel demand environment in the EU is expected to remain strong.
Overall, we expect the company’s total revenue to grow at a CAGR of 8% over the next two years. However, an unexpected turn of events with respect to the current trade war circumstances can have a challenging impact on the company’s overall performance. We shall be keenly watching as to how the situation unfolds. In case you do not agree with our estimates, you can modify our assumptions to arrive at your own revenue estimate for the company by using our interactive dashboard How Is US Steel Likely To Grow.
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