U.S. Steel (NYSE:X) +1.8% in Friday's trading, well below earlier gains, after Q2 guidance easily beat consensus estimates, but two Wall Street analysts nevertheless cut their stock price targets.
Elevated raw material costs in Q1 were more than offset by higher selling prices and increased shipping volumes, said Morgan Stanley, which maintained its Equal Weight rating and $27 price target.
But BMO analyst David Gagliano cut his stock PT to $23 from $30 while keeping his Market Perform rating, saying the company's update was not a surprise, considering other better than expected steel-related guidance during the week.
Credit Suisse's Curt Woodworth cut his PT to $44 - still more than double current levels - from $49 while sticking with an Outperform rating, saying the EPS beat was driven mostly by higher than expected stock buybacks during the quarter.
Woodworth continues to view U.S. Steel (X) as the most undervalued steel company and believes structural transformation to the balance sheet and quality of the asset base is underappreciated by investors.
U.S. Steel (X) "tends to burn investors during recessions," Paul Franke writes in a bearish analysis posted recently on Seeking Alpha.