Cleveland-Cliffs and U.S. Steel are trading at attractive valuation levels.
India has recently imposed export tariffs on steel producers, providing support to global steel markets and U.S. – based steelmakers. Steel stocks have suffered a strong pullback in the last two months, but now they have a good catalyst for a potential rebound.
Analyst estimates for Cleveland-Cliffs have continued to move higher despite the recent pullback of the stock. The company is expected to report earnings of $6.21 per share in the current year and $4.2 per share in the next year, so the stock is trading at less than 6 forward P/E.
Analysts remain skeptical about the company’s ability to keep current profits in the next year, but it looks that commodity rally could last longer due to geopolitical tensions and supply chain issues. Cleveland-Cliffs stock has a decent chance to rebound from current levels due to potential multiple expansion as the current valuation levels look too cheap.
U.S. Steel has also been under significant pressure in recent weeks. Analysts expect that U.S. Steel will report earnings of $11.49 per share in the current year and $3.37 per share in the next year, so the stock is trading at less than 8 forward P/E.
It should be noted that analyst estimates for the next year have recently started to fall. U.S. Steel faced some disruptions in Slovakia as coal deliveries from Russia were stopped, but the company has enough time to find alternatives.
Meanwhile, the fundamentals of the steel market remain strong, so U.S. Steel stock has a good chance to gain additional upside momentum in the upcoming weeks and move closer to recent highs.
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Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.