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What to Expect from US Steel

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Even if the results are strong, the run-up leaves the stock looking pricey.

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Banking on an economic rebound and better times ahead, investors have pushed hard into US Steel (X) recently. Shares of the Pittsburgh-based company, which has a market capitalization of nearly $6 billion, have jumped 41% over the last six months to about $41 from a March low of $16.

On Tuesday, US Steel and other steel companies, including Schnitzer Steel (SCHN), will report third-quarter results. Analysts are predicting that US Steel turns in a loss of $2.87 a share versus a profit of $7.79 a share in the year-ago period, according to Briefing.com.

The global economic tsunami in 2008 sharply reduced steel demand, but the Street expects US Steel to bounce back into the black next year, albeit modestly. The question, for investors, is how much of that recovery is already now priced in.

US Steel is an integrated steel producer with major production operations in North America and Europe. The company has annual raw steel production capability of 31.7 million net tons.

This makes US Steel the eighth largest steel producer in the world, the largest integrated steel producer headquartered in North America, and one of the largest integrated flat-rolled producers in Central Europe.

US Steel uses iron ore, coal, coke, steel scrap, zinc, tin, and other metallic additions to produce a wide range of steel products. Its customers are in the automotive, appliance, container, industrial machinery, construction and oil, gas and petrochemical industries.

The downturn in the global economy last year had a significant negative effect on the company's business. Its raw steel capability utilization, which has averaged between 79% and 87% during the years 2004-08, averaged only 46% in the fourth quarter of 2008.

Analysts expect US Steel to lose $10.79 a share this year. Revenue, professional guessers estimate, will fall 53.9% to $10.97 billion.

But, next year, US Steel should swing back to a profit of $0.96 a share.
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