U.S. Steel Misses in 1Q, Loss Trims

Zacks

U.S. Steel (X) logged net loss of $73 million or 51 cents per share in the first quarter of 2013, narrower than net loss of $219 million or $1.52 per share posted a year ago. The bottom-line in the year-ago quarter was hurt by a hefty loss associated with the sales of the company’s Serbia unit.

The net loss in the reported quarter include an after-tax charge of $22 million, or 16 cents per share, related to repurchases of Senior Convertible Notes.

Barring the after tax charge, net loss was 35 cents a share compared with a net income of 67 cents per share. It was wider than the Zacks Consensus Estimate of a loss of 18 cents.

Revenues for the first quarter fell nearly 11.2% year over year to $4,595 million, missing the Zacks Consensus Estimate of $4,612 million. The company faced continued economic challenges and competitive steel market conditions in the quarter.

U.S. Steel’s shares fell roughly 4% in pre-market trading.

Segment Highlights

The company’s Flat-rolled segment reported a loss of $13 million in the first quarter compared with a profit of $183 million in the year ago quarter and a profit of $11 million in the fourth quarter of 2012. The sequential decline was due to increased operating costs.

Shipments increased 2.4% sequentially to 4 million net tons but decreased 1.8% year over year.  Average realized price was $719/net ton in the quarter, down 5.9% on year over year basis and 0.3% on a sequential basis.

U.S. Steel Europe (:USSE) recorded a profit of $38 million in the quarter, representing an improvement over last year’s loss of $34 million and profit of $7 million in fourth-quarter 2012. Sequential increase was due to higher shipments. Average realized price of $718 per net ton declined 4.1% year over year and was at par sequentially.

U.S. Steel’s Tubular segment’s profit tumbled 50.4% year over year to $64 million but doubled sequentially. The sequential jump was due to decreased operating costs and increased shipments. Average realized price declined 9.9% year over year and 4.2% sequentially to $1,556 per net ton.

Financial Condition

U.S. Steel had cash and cash equivalents of $733 million as of Mar 31, 2013, compared with $652 million as of Mar 31, 2012. Long-term debt was $3,932 million as of Mar 31, 2013, compared with $3,802 million as of Mar 31, 2012.

Outlook

Moving ahead, U.S. Steel expects its second-quarter 2013 total reportable segment and Other Businesses operating results to be near breakeven. The company expects lower results for the Flat-rolled segment in the second quarter and envisions lower shipments on a sequential basis.

Operating costs are forecast to increase led by higher repairs and maintenance costs as well as higher natural gas costs. Average realized prices are expected to be comparable to the first quarter.

Results from the USSE segment is expected to be lower than the first quarter as a result of higher raw materials costs, mainly iron ore. Shipments and average realized euro-based prices are expected to be comparable to the first quarter.

U.S. Steel expects the Tubular segment to post second quarter results at par with the first quarter. Shipments are expected to increase compared to the first quarter to support a higher level of drilling activity while average realized prices are anticipated to be slightly lower.

U.S. Steel currently carries a short-term Zacks Rank #4 (Sell).

Other companies in the steel industry with favorable Zacks Rank are Gibraltar Industries Inc. (ROCK), Shiloh Industries Inc. (SHLO) and Mechel OAO (MTL). While Gibraltar and Shiloh hold a Zacks Rank #1 (Strong Buy), Mechel retains a Zacks Rank #2 (Buy).

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