U.S. Steel Global Pricing Down

United States Steel Corporation (X - Analyst Report) is a leading steel manufacturer in the U.S. However, rising supply from China, low demand from the automotive and residential sector and rising commodity and labor costs lead us to rate the stock a Hold with a six-month target price of $30.00.

U.S. Steel Corp. reported fourth quarter 2008 net income of $308 million, or $2.65 per diluted share, compared to fourth quarter 2007 net income of $35 million, or $0.29 per diluted share. Fourth quarter 2008 net income was increased by $76 million, or 65 cents per diluted share.

Despite improving profitability and cash flows, there are several challenges in store for U.S. Steel. China's steel output has outpaced demand, causing excess supplies and depressing global steel prices. If the trend continues, it would severely impact the company's bottom-line growth. In addition, U.S. Steel's domestic flat product volumes will suffer from lower steel demand from the automotive and residential construction sector.

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