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U. S. Steel Acquires POSCAL's 50% Ownership Interest in UPI

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United States Steel Corporation (X - Free Report) has completed the buyout of POSCO-California Corporation’s (“POSCAL”) 50% partnership interest in USS-POSCO Industries (“UPI”). The transaction is effective Feb 29, 2020.

Notably, U.S. Steel and POSCO of South Korea entered into a 50-50 joint venture (JV) under the name, USS-POSCO Industries, which is based in Pittsburg, CA. In Jan 23, 2020, U.S. Steel and POSCAL inked an agreement through which the former will purchase POSCAL’s 50% ownership interest in UPI.

The JV markets tin mill and sheet products especially in the western United States. UPI manufactures galvanized sheets, hot rolled pickled and oiled and cold-rolled sheets products from hot bands mainly provided by U. S. Steel. Annual production capacity of UPI is roughly 1.5 million tons.

Following a long and collaborative relationship, U. S. Steel and POSCAL believes that ownership by a single group will enable UPI to continue operating effectively and serve customers.

Shares of U.S. Steel have plunged 64% in the past year compared with the industry’s 33.4% decline.

U.S. Steel reported adjusted loss per share of 64 cents in fourth-quarter 2019 against adjusted earnings per share of $1.82 in the prior-year quarter. The figure was narrower than the Zacks Consensus Estimate of a loss of $1.14.

The company expects first-quarter 2020 to witness slowdown due to lower first-quarter shipments in the Flat-rolled division as U.S. Steel intends to prepare for the blast furnace outage at Gary Works in April 2020. Normal seasonality of the company’s mining operations is also expected to impact first-quarter results.

U.S. Steel stated that it has achieved $75 million of run-rate fixed cost reductions. The company also showcased flexibility by adjusting its 2020 capital spending to prioritize strategic investments. The company de-risked strategy execution by raising $1.1 billion of incremental capital.

Zacks Rank & Key Picks

U.S. Steel currently carries a Zacks Rank #5 (Strong Sell).

Few better-ranked stocks in the basic materials space are Daqo New Energy Corp (DQ - Free Report) , Sibanye Gold Limited (SBSW - Free Report) and Impala Platinum Holdings Limited (IMPUY - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has an expected long-term earnings growth rate of 29%. The company’s shares have surged 72.5% in the past year.

Sibanye has an expected long-term earnings growth rate of 20.4%. Its shares have returned 98.6% in the past year.    

Impala Platinum has an expected long-term earnings growth rate of 26.5%. The company’s shares have surged 94.5% in the past year.

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