Buying Calls of Steel Stocks (Part 3): United States Steel Corporation

We continue the series on stocks of U.S steel makers as we explore the possibilities in the options of United States Steel Corporation (NYSE:X). United States Steel Corporation with its market capitalization of $4.86B is an integrated steel producer of flat-rolled and tubular products with production ore.

The company is a leading steel manufacturer in the U.S. and the fifth largest in the world. It produces and sells steel mill products including flat-rolled and tubular products in North America and Europe. U.S. Steel has an annual raw steel production capacity of 27 million net tons. The Company operates in three segments: Flat-rolled Products (Flat-rolled), U. S. Steel Europe (USSE) and Tubular Products (Tubular). If you are interested in getting steel for a construction project then it might be a good idea for you to check out something like these steel channel sizes to give you a better idea of what you should get for you construction project.

Impressive Bullish Run

U.S Steel’s impressive bullish run is evident today as the stock traded up to close with a 1.40% gain after gaining 4.31% to make a new 52-week high at $33.85. The chart below shows how shares of U.S Steel have experienced a bullish run in the last one year.

U.S Steel

Why Shares of U.S Steel Exploded Today

Shares of U.S Steel have consistently risen in the last three trading sessions after the company had delivered decent second quarter (Q2 2014) results. As I have mentioned earlier, the bullish run in the last one year had led the stock to a new 52-week high today and the more interesting thing is that shares of U.S steel traded up today despite a 1.57% general decline in the Basic Material sector.

Earnings at a Glance

  • U.S Steel reported second quarter 2014 net loss of $18 million, or $0.12 per diluted share compared to a second quarter 2013 net loss of $78 million, or $0.54 per diluted share
  • Net Sales was reported at $4.40B compared to $4.42B in the same quarter in 2013
  • Steel’s reporting segments in Flat Rolled, U.S Steel Europe and Tubular delivered outstanding results in comparison to the year ago quarter
  • For instance, the Flat-rolled segment delivered a 158% increase on income from operations at $30M compared to a loss of $51M reported in the year-ago quarter
  • The U.S Steel Europe segment delivered a 280% increase from $10M in the year-ago quarter to $38M in the just completed quarter.
  • The Tubular segment delivered a 4.4% increase from $45M in the year-ago quarter to $47M in the completed quarter
  • Going forward, U.S Steel says it “expects operating income for our reportable segments and Other Businesses to increase significantly over the second quarter, as we return to normal operating levels.”

More Reasons to Stay Bullish on U.S Steels

The first reason to stay bullish on U.S Steel is the company’s committed improvement to improving its cost structure and increasing revenues to sustainable levels through its “Carnegie Way” initiative. U.S Steel expects its cost saving initiatives to deliver about $290M in cost and margin improvements this year.

The second reason to stay bullish on U.S Steel is the increasing demand for steel in the automotive industry. The company is set to start recording gains from its last year collaboration agreement with Carpenter Technology Corporation (a specialty allow maker) for the development of lighter and stronger steel that can be used in the automotive industry.

How to Trade X Options

U.S Steel is of the steel companies with impressive upside potential in the short and long terms. I am optimistic about the potential for U.S Steel’s growth in revenue and income this year and I have a $40 price target on the stock. I recommend the X Jan 2015 35.000 call (X150117C00035000) at an asking price of $2.46 per contract.

— Daily Option Alerts

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