Morgan Stanley Stays Cautious on U.S. Steel (X), Expects Stock to Hit $55

On May 26, an analyst from Morgan Stanley reiterated his cautious stance on United States Steel Corp. (NYSE:X) with an Equal-Weight rating. The analyst expressed hope for progress in Nippon Steel Corp. (OTC:NPSCY)’s potential investment in the company following signals of approvals from President Trump regarding a partnership. However, the deal’s specifics remain unclear, and whether the agreement will be approved in its proposed form as an acquisition is still uncertain.

The analyst expects U.S. Steel’s share price will approach his bull-case scenario of $55, which Nippon Steel has offered in its takeover bid.

A close up of a specialized steel product that is being processed in a manufacturing plant.

While the analyst is optimistic about the company’s near-term valuation, he believes the deal could negatively impact its domestic competitors, including Cleveland-Cliffs Inc. (NYSE:CLF), Steel Dynamics Inc. (NASDAQ:STLD), and Nucor Corp. (NYSE:NUE). He notes that combining both companies will create a stronger competitor in the US steel market with world-leading manufacturing capabilities and larger production capacities. Nippon reportedly plans to increase flat steel capacity by expanding U.S.  Steel’s existing facilities and building a new steel mill. According to the analyst, this will impact the market dynamics and add to supply-side pressure on competitors.

Notably, in March, Morgan Stanley downgraded U.S. Steel’s rating to Equal-Weight from Overweight, with a price target of $39. The analyst viewed this as the fair value of U.S. Steel as a standalone entity. This valuation aligned with Nippon’s $55 per share offer, which represented a 40% premium over the standalone target.

United States Steel Corp. (NYSE:X) is a leading steel manufacturer with operations in the United States of America and Central Europe. It has an annual raw steel production capability of 25.4 million net tons (20.4 million tons in North America and 5.0 million tons in Europe).

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