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U.S. Steel (X) to Transfer $284M in Pension Plan Obligations

United States Steel Corporation X recently stated that it has purchased group annuity contracts from Banner Life Insurance Company and William Penn Life Insurance Company of New York to transfer roughly $284 million of the company’s pension plan obligations to Legal & General. The purchase of the group annuity contracts is expected to be funded directly by the assets of the pension plan.

This transaction is another significant step in strengthening the company’s balance sheet and further de-risking its pension plan, which remains more than 100% funded and is an important source of differentiation versus some peers in the steel industry, U.S. Steel noted.

The purchase results in the transfer of administrative and benefit-paying responsibilities for roughly 17,800 U.S. retirees and beneficiaries to Legal & General. On Jan 1, 2022, Legal & General will start paying benefits for certain retirees and beneficiaries in the United States Steel Corporation Plan for Employee Pension Benefits. There will be no change to the pension benefits for any retirees and beneficiaries due to the transaction.

U.S. Steel expects to recognize a non-cash pension settlement charge of roughly $110 million, subject to the finalization of actuarial assumptions and other applicable adjustments in the fourth quarter of 2021 as a result of this transaction.

Shares of U.S. Steel have surged 137.8% in the past year compared with a 61.2% rise of the industry.

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The company, in its last earnings call, noted that its balance sheet has been transformed and the cash flow generation of the business will allow it to fund its organic growth investments. U.S. Steel remains confident in the long-term value that its mini mill will create, as the company broadens its competitive advantage to make sustainable and differentiated steel.

 

Zacks Rank & Key Picks

U.S. Steel currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Nucor Corporation NUE, The Chemours Company CC and Dow Inc. DOW.

Nucor has an expected earnings growth rate of 583.5% for the current year. The Zacks Consensus Estimate for earnings for the current year has been revised 18.1% upward in the past 60 days.

Nucor beat the Zacks Consensus Estimate for earnings in two of the last four quarters, while missing the same twice. The company has a trailing four-quarter earnings surprise of roughly 2.74%, on average. Its shares have skyrocketed around 106.7% over a year. NUE currently sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has an expected earnings growth rate of 105.1% for the current year. The Zacks Consensus Estimate for the current year has been revised 10% upward in the past 60 days.

Chemours beat the Zacks Consensus Estimate for earnings in all of the last four quarters. CC has a trailing four-quarter earnings surprise of roughly 34.2%, on average. Its shares have also rallied around 43.3% over a year. It currently carries a Zacks Rank #2 (Buy).

Dow has a projected earnings growth rate of 447% for the current year. The consensus estimate for the current year has been revised 7.2% upward in the past 60 days.

Dow beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 14.1%. The company’s shares have gained around 11.3% in a year. DOW currently carries a Zacks Rank #2.


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United States Steel Corporation (X): Free Stock Analysis Report
 
Nucor Corporation (NUE): Free Stock Analysis Report
 
Dow Inc. (DOW): Free Stock Analysis Report
 
The Chemours Company (CC): Free Stock Analysis Report
 
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