US Steel continues its march to $10. Here's a few reasons why.
Unsustainable debt ($9.6 BILLION) and unfunded pension liabilities (over $5 BILLION) which is almost twice the company's entire market cap, no profits in 4 years, no profits this year, poor management, they now have to keep 12k Slovakian employees they wanted to get rid of, an overstated EROPA they will never attain in the current interest rate environment that distorts their actual earnings numbers, high labor costs, high fixed costs, poor demand, low steel prices, iron ore prices continuing to tank. This company has nothing going for it. This has nowhere to go but down. Every week, every month it goes down more while the markets continue to climb to all time highs. Axiom Capital analyst Gordon Johnson has a $10 price target within the next six months which does seem very attainable with all the problems this company is facing and will continue to face.
disclosure: short 4,500 shares at an average cost of $23.93 per share.
the only thing you are missing is that they can earn close to $10 in a single year when demand comes back. They are not bleeding cash right now. Its pretty much business as usual. Lots of operating leverage. I suspect it won't hit $10 unless they start bleeding cash. Right now its a call option on future demand. With the recent capital raise and low interest rates refinance, and positive cash flow while you wait, it may not fall as low as you think. Iron ore prices are just a sideshow. The real operating leverage comes from increased demand. X earned a fortune when Iron ore prices were 1/4th the current level. What they need is real construction demand. eventually it will come back.