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U.S. Steel (X) Down 23.8% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for United States Steel (X). Shares have lost about 23.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is U.S. Steel due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

U.S. Steel Tops Earnings and Revenue Estimates in Q2

U.S. Steel saw lower profits in the second quarter of 2019. The company logged net earnings of $68 million or 39 cents per share for the quarter, down 68% from $214 million or $1.20 in the year-ago quarter.

Barring one-time items, adjusted earnings came in at 45 cents a share, down from $1.46 a year ago. It surpassed the Zacks Consensus Estimate of 40 cents.

Revenues fell roughly 2% year over year to $3,545 million in the quarter, but beat the Zacks Consensus Estimate of $3,373.5 million.

Segment Highlights

Flat-Rolled: Profit in the Flat-Rolled segment was $134 million in the quarter, down 40% from $224 million in the year-ago quarter, hurt by lower prices.

Total steel shipments in the segment rose roughly 9% year over year to 2,804,000 tons and average realized price per ton in the unit was $779, down roughly 5%.

U.S. Steel Europe: The segment recorded a loss of $10 million, compared with a profit of $115 million a year ago. Total shipments in the segment went down around 13% year over year to 1,004,000 tons and average realized price per ton for the unit was $652, down roughly 8% year over year.

Tubular: U.S. Steel’s Tubular segment posted a loss $6 million, compared with a loss of $35 million in the year-ago quarter.

Total steel shipments for the segment was down around 3% year over year to 195,000 tons. Average realized price per ton for the unit was $1,524, up roughly 5%.

Financials

U.S. Steel ended the quarter with cash and cash equivalents of $651 million, down around 47% year over year. Long-term debt fell roughly 8% year over year to $2,345 million.

The company returned $37 million to shareholders during the quarter including share repurchases worth $28 million.
 
Outlook

U.S. Steel noted that it completed several asset revitalization outages across the flat-rolled footprint on time and budget during the reported quarter. These include upgrades to its Mon Valley steel shop. The company expects these investments to boost its operating performance and reliability to offer low-cost, high-quality liquid steel for its future endless casting and rolling investment.

The company also said that execution of its technology investments including the endless casting and rolling line at Mon Valley, USSK dynamo line and tubular electric arc furnace remain on track to deliver around $400 million of incremental run-rate EBITDA benefits once completed.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -655.56% due to these changes.

VGM Scores

At this time, U.S. Steel has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, U.S. Steel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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