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U.S. Steel (X) to Post Q4 Earnings: What's in the Offing?

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Zacks Equity Research
·5 min read
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United States Steel Corporation X is scheduled to come up with its fourth-quarter 2020 results after the bell on Jan 28. Improved end-market demand and higher steel prices are likely to have aided its fourth-quarter results. The company is also expected to have benefited from its actions to improve cost and operating performance in the quarter.

The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 17%. It delivered an earnings surprise of 12.9% in the last reported quarter.

Shares of U.S. Steel are up 93% over a year, compared with the industry’s rise of 25.1%.

 

 

Let’s see how things are shaping up for this announcement.

 

What do the Estimates Say?

U.S. Steel, last month, issued its guidance for the fourth quarter. It expects adjusted loss per share to be around 85 cents for the quarter. The guided figure is narrower than the loss per share of $1.21 in the third quarter. The company also projects adjusted EBITDA to be around $55 million for the fourth quarter.

The Zacks Consensus Estimate for revenues for U.S. Steel for the fourth quarter is currently pinned at $2,537 million, indicating a 10.2% year-over-year decline.

Moreover, the Zacks Consensus Estimate for shipments for the company’s Flat-Rolled unit for the quarter currently stands at 2,176,000 tons, reflecting a 13.5% year-over-year decline. The consensus estimate for average realized price per ton in the unit stands at $768, suggesting a 9.9% year-over-year increase.

The Zacks Consensus Estimate for shipments for U.S. Steel Europe segment is pegged at 769,000 tons, indicating a 1.6% year-over-year rise. The same for average realized price per ton in the unit stands at $635, calling for a 2.1% year-over-year increase.

For the Tubular segment, the consensus estimate for shipments is pegged at 91,000 tons, reflecting a 52.8% year-over-year drop. The same for average realized price per ton in the unit stands at $1,256, calling for a 3.2% year-over-year decline.

Some Factors at Play

The company’s fourth-quarter results are likely to have benefited from improved demand across end markets, higher domestic steel prices and its efforts to improve operation efficiency and reduce costs.

U.S. Steel, last month, said that it saw improved flat-rolled demand in the United States and Europe during the fourth quarter backed by end-markets such as automotive, appliance and packaging. The flow-through of higher steel prices, improved operations and cost saving initiatives also drove its performance. The company expects the Flat-rolled segment to generate positive EBITDA in the fourth quarter on the back of strong order levels and higher steel prices.

The company also expects to deliver sequentially higher fourth-quarter results in its Europe unit. Strong demand in Europe along with improved commercial performance and cost management is expected to have offset raw material headwinds from higher iron ore prices in the fourth quarter.

Meanwhile, steel prices are on an upswing on the back of rising demand and supply shortages. Notably, U.S. steel prices have recovered strongly and hit record levels after plunging to pandemic-induced multi-year lows in August 2020. The benchmark hot-rolled coil (“HRC”) prices started to recover in September and are screaming higher since then. HRC prices zoomed past $1,000 per short in the last week of December amid tight supply and surging demand.

As such, higher domestic steel prices are likely to have boosted the company’s selling prices and supported its margins in the to-be-reported quarter.

 

United States Steel Corporation Price and EPS Surprise

 

United States Steel Corporation Price and EPS Surprise
United States Steel Corporation Price and EPS Surprise

United States Steel Corporation price-eps-surprise | United States Steel Corporation Quote

 

Zacks Model

Our proven model does not conclusively predict an earnings beat for U.S. Steel this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP for U.S. Steel is -8.94%. The Zacks Consensus Estimate for for the fourth quarter is currently pegged at a loss of 62 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: U.S. Steel currently carries a Zacks Rank #3.

Stocks That Warrant a Look

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

LyondellBasell Industries N.V. LYB, scheduled to release earnings on Jan 29, has an Earnings ESP of +10.12% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Celanese Corporation CE, scheduled to release earnings on Jan 28, has an Earnings ESP of +2.38% and carries a Zacks Rank #2.

FMC Corporation FMC, scheduled to release earnings on Feb 9, has an Earnings ESP of +1.93% and carries a Zacks Rank #3.

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