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U.S. Steel (X) Beats Earnings and Revenue Estimates in Q3

Zacks Equity Research

United States Steel Corporation X slipped to a loss (on a reported basis) of $84 million or 49 cents per share in the third quarter of 2019 from a profit of $291 million or $1.62 per share in the year-ago quarter.

Barring one-time items, adjusted loss came in at 21 cents a share, compared with earnings of $1.79 a year ago. However, it was narrower than the Zacks Consensus Estimate of a loss of 29 cents.

Revenues fell roughly 18% year over year to $3,069 million in the quarter, but beat the Zacks Consensus Estimate of $3,025.9 million. Sales were hurt by lower average realized prices.

United States Steel Corporation Price, Consensus and EPS Surprise

Segment Highlights

Flat-Rolled: Profit in the Flat-Rolled segment was $46 million in the quarter, down 85% from $305 million in the year-ago quarter, affected by lower prices.

Total steel shipments in the segment were essentially flat year over year at 2,654,000 tons and average realized price per ton in the unit was $732, down roughly 15%.

U.S. Steel Europe: The segment recorded a loss of $46 million, compared with a profit of $72 million a year ago. Total shipments in the segment went down around 31% year over year to 765,000 tons and average realized price per ton for the unit was $656, down roughly 2% year over year.

Tubular: U.S. Steel’s Tubular segment posted a loss $25 million, compared with a profit of $7 million in the year-ago quarter.

Total steel shipments for the segment was down around 5% year over year to 174,000 tons. Average realized price per ton for the unit was $1,417, down roughly 12%.

Financials

U.S. Steel ended the quarter with cash and cash equivalents of $476 million, down around 65% year over year. Long-term debt was flat year over year at $2,500 million.

Outlook

U.S. Steel noted that it will remain focused on strategic actions including fixed cost reduction and re-scoping its asset revitalization investments amid a challenging market environment. The company completed three financing activities following the end of the third quarter which provided around $1.1 billion of incremental capital to support its strategy.

The company also completed its buyout of a 49.9% ownership stake in Arkansas-based Big River Steel for roughly $700 million. U.S. Steel expects the financial impacts of this acquisition to start reflecting in its fourth-quarter 2019 results.

U.S. Steel expects the investment in Big River to bolster its competitive position in highly strategic steel-end markets and establish an unmatched product platform in high-margin end-markets including energy, infrastructure and automotive.

Price Performance

Shares of U.S. Steel have lost 36.9% year to date, underperforming the industry’s 12.8% decline.


Zacks Rank & Key Picks

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

Better-ranked stocks worth a look in the basic materials space include Agnico Eagle Mines Limited AEM, Kinross Gold Corporation KGC and Franco-Nevada Corporation FNV, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has a projected earnings growth rate of 168.6% for the current year. The company’s shares have rallied 65% in a year’s time.

Kinross has projected earnings growth rate of 210% for the current year. The company’s shares have surged around 76% in a year’s time.

Franco-Nevada has estimated earnings growth rate of 39.3% for the current year. The company’s shares have gained roughly 49% in a year’s time.

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