Monday, June 23, 2008

Patrick Schultz
Goldman Swaps in US Steel on Conviction List
6/23/2008 11:38 AM EDT
Goldman Sachs added US Steel (X) to their conviction list as the best way to play the steel sector, replacing Nucor (NUE). This is particularly interesting to me, as shares of X have been on a tear, rising over 56% year-to-date. Goldman believes that higher steel prices are achievable and X has the highest sensitivity to rising prices. In their view, global demand will outstrip supply for several years.

Of note, Goldman's estimates are well above consensus, which it views as being much too low. Current 2009 consensus is for $17.96, while GS sees for $28.25 for 2009, or an incredible 57% higher. Using Goldman's new forward estimate, X is trading only at 6.7 times earnings.

Position: none

Robert Marcin

No comments: