US Steel’s Stock Down 44% In A Month; Will It Outperform The Market Post Coronavirus?

United States Steel Corp’s (NYSE: X) stock is very likely to outperform the broader S&P 500 index post coronavirus and oil price war crisis, going by the trends seen during the 2008 slowdown, where it fell 81% from the approximate pre-crisis peak in 2008, and recovered by a whopping 181% by early 2010. The decline in US Steel’s stock and recovery was higher than that of the S&P 500.

On Monday, March 9, the stock market saw its biggest sell off since the 2008 crisis, with the decline continuing throughout the week. There were two distinct trends driving the sell-off. Firstly, the increasing number of Coronavirus cases outside China is causing mounting concerns of a global economic slowdown. Secondly, crude oil prices plummeted by more than 20% after Saudi Arabia increased production. US Steel’s stock fell about 30% between 8th March and 12th March 2020, and is down by a total of 44% since early February, considering the impact that the outbreak and a broader economic slowdown could have on steel prices and demand, and the global steel industry.

Moreover, though U.S. Steel’s products do not have much exposure to China, the steel demand from China affects global steel price levels to a large extent, in turn impacting the company’s price realization for its products. With lower demand from automobile and construction players, the prices of steel have dropped recently. Additionally, with the outbreak and spread of coronavirus expected to lead to further slowdown in economic activity and demand, global steel prices are expected to remain under pressure. However, going by the trends seen during the 2008 economic slowdown, it’s likely that US Steel’s stock could bounce back strongly and potentially outperform the market as the crisis winds down.

In this analysis, we take a look at how the company’s stock reacted to the economic crisis of 2008 and compare its performance with the S&P 500. View our complete dashboard analysis on How Did United States Steel Stock Fare Compared With S&P 500?

US Steel Stock versus S&P 500 Over 2020 Coronavirus/Oil Price War Crisis

• US Steel’s stock declined by close to 30% between 8th March 2020 and 12th March 2020, and the stock is down by about 44% since February 1, after the WHO declared a global health emergency.
• The S&P 500 declined by 17% between 8th March 2020 and 12th March 2020, and has fallen by 25% since February 1, after the global health emergency was declared by the WHO.

US Steel versus the S&P 500 During 2007-08 Financial Crisis

• US Steel’s stock declined from levels of around $95 in October 2007 (the pre-crisis peak) to levels of around $18 in March 2009 (as the markets bottomed out) and recovered to levels of about $50 in early 2010.
• Through the crisis, X stock declined by as much as 81% from its approximate pre-crisis peak. This marked a sharper decline than the S&P which fell by as much as 51%.
• However, the stock recovered strongly, rising by 181% between March 2009 and January 2010. In comparison, the S&P rose by about 48% over the same period.

Conclusion

While US Steel’s stock has declined due to the Coronavirus/Oil Price War crisis, going by trends seen during the 2008 slowdown, it’s likely that it could bounce back strongly and potentially outperform as the crisis winds down.

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