(Bloomberg) -- U.S. Steel Corp. has surged 24 percent this year, but it's still trading well below where it could given the price of the metal.
That argument comes from Bloomberg Intelligence's Andrew Cosgrove, who said in a note that the iconic American steelmaker could rise to as high as $84 a share, from $43.69 on Friday. While that's a best-case scenario that assumes higher-than-average earnings multiples and a surge in steel prices, the tariffs ordered by President Donald Trump on Thursday add to the case that the shares don't fully reflect recent steel-price gains.
“The market is definitely not pricing in the current price of hot-rolled coil in these stocks,” Cosgrove, a senior industry analyst, said in a telephone interview. “They're pricing hot-rolled coil at about $700, and it's currently at $840.”
Cosgrove said in a separate note Friday that the tariffs could displace at least 5.6 million tons of steel imports across six different products, leaving open the door for domestic companies like U.S. Steel to fill the demand gap.
Read more: Will Trump's tariffs help the rust belt? -- a QuickTake explainer
U.S. hot-rolled steel coil is a benchmark product used in everything from bridges to microwaves. Prices for hot-rolled coil, along with cold-rolled coil, galvanized, plate, oil-country tubular goods and rebar, “all have upside from here,” Cosgrove said in the report.
Pittsburgh-based U.S. Steel's stock has been helped by anticipation of U.S. tariffs and progress on a program to inject some $1.2 billion to upgrade aging facilities. Last week, the company announced it would restart a furnace in Granite City, Illinois, which Cosgrove said could add 1.5 million tons of raw steel capacity. U.S. Steel credited the president's tariff promise for the action.
To contact the reporter on this story: Joe Deaux in New York at jdeaux@bloomberg.net.
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Joe Richter, Steven Frank
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