{"id":40575,"date":"2023-11-02T13:44:34","date_gmt":"2023-11-02T13:44:34","guid":{"rendered":"https:\/\/prosfunds.com\/news\/u-s-steel-is-a-buy-in-light-of-megatrends-ma-and-strategic-investments-nysex\/"},"modified":"2023-11-02T13:44:37","modified_gmt":"2023-11-02T13:44:37","slug":"u-s-steel-is-a-buy-in-light-of-megatrends-ma-and-strategic-investments-nysex","status":"publish","type":"post","link":"https:\/\/prosfunds.com\/?p=40575","title":{"rendered":"U.S. Steel Is A Buy In Light Of Megatrends, M&A, And Strategic Investments (NYSE:X)"},"content":{"rendered":"
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Introduction<\/h2>\n

It’s time to talk about United States Steel (NYSE:X<\/span>)<\/strong>, which is one of my favorite cyclical stocks on the market. Not necessarily because it’s such a great company (it has a very poor long-term total return), but because it’s one of America’s oldest steel companies, which tells us so much about the state of the economy. It’s also a fantastic trading vehicle thanks to its cyclical behavior and elevated volatility.<\/span><\/p>\n

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Data by YCharts<\/figcaption><\/figure>\n<\/p>\n

On August 12, I wrote my most recent article on U.S. Steel, covering the impact of the Inflation Reduction Act on steel demand, among other issues.<\/p>\n

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The company’s strategic alignment with the Inflation Reduction Act and investments in sustainable steel production, coupled with investments in the electrical steel market, positions it for potential growth.<\/em><\/p>\n

Strong quarterly results, marked by increased adjusted EPS and EBITDA, as well as positive cash flow and a healthy balance sheet, underscore its resilience.<\/span><\/em><\/p>\n<\/blockquote>\n

On top of that, X is expanding its business. The company is moving into higher-margin steel products, positioning it for multiple megatrends like de-carbonization, de-globalization, and tools that can significantly leverage its margins.<\/p>\n

As a result, the company is now the target of major takeovers. Initially, Cleveland-Cliffs (CLF) showed interest in buying, which United States Steel rejected.<\/p>\n

Now, it’s working with multiple parties on a potential deal. Rumors are that this includes Cleveland-Cliffs (they did not comment on it in their recent earnings call), ArcelorMittal (MT), and a number of private and Canadian players.<\/p>\n

While it needs to be seen if someone buys X and at what price (it could very well be at a juicy premium), the company is very attractive – especially as a stand-alone play.<\/p>\n

In this article, I’ll use its recent earnings and the bigger picture to assess the risk\/reward of this stock in light of challenges and opportunities.<\/p>\n

So, let’s get to it!<\/p>\n

A Good Quarter Despite Headwinds<\/h2>\n

Essentially, there are three key things that need to be discussed when dealing with U.S. Steel.<\/p>\n