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U.S. Steel (X) Q2 Loss Lower than Expected, Sales Miss
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U.S. Steel (X - Free Report) reported a narrower loss of $46 million or 32 cents per share in the second quarter of 2016, benefiting from better market conditions. The steel giant had recorded a loss of $261 million or $1.79 per share a year ago.
Barring one-time items, loss was 31 cents per share for the reported quarter, narrower than the Zacks Consensus Estimate of a loss of 55 cents.
Revenues tumbled roughly 10.9% year over year to $2,584 million in the second quarter, hit by lower year-over-year selling prices. Sales also missed the Zacks Consensus Estimate of $2,663 million. Total steel shipments remained relatively flat year over year in the quarter.
In the reported quarter, U.S. Steel fared better than the prior-year quarter as well as the preceding quarter. Market conditions improved and the company’s European segment saw best results since third-quarter 2008. Management’s focus on improving the cost structure also led to an improvement in margins.
Segment Highlights
U.S. Steel’s Flat-Rolled segment recorded a profit of $6 million against a loss of $64 million in the year-ago quarter, due to improved steel prices throughout the reported quarter. While shipments in the quarter remained relatively stable year over year, average realized prices fell to $642 per ton from $695 per ton a year ago.
The U.S. Steel Europe (“USSE”) segment posted a profit of $55 million in the reported quarter, higher than $20 million recorded a year ago. Lower average selling price was more than offset by higher shipments, better prices of raw materials, operating efficiencies and more Carnegie Way benefits.
U.S. Steel’s Tubular segment registered a loss of $78 million in the quarter, wider than a loss of $66 million a year ago, due to lower prices and shipments. Shipments were adversely affected by lower average rig counts.
Financials
U.S. Steel exited the quarter with cash and cash equivalents of $820 million, down 32.2% year over year. Long term debt decreased by 2.1% year over year to $3,058 million. Cash provided by operating activities climbed around 107.3% year over year to $313 million for the first half of 2016.
Outlook
Moving ahead, U.S. Steel envisions further improvement in market conditions for its Flat-Rolled and European divisions. Recent favorable preliminary trade rulings (that led to levy of heavy tariffs on imports) on steel trade cases have been a catalyst for improved domestic market conditions. Further, the recent rise in prices positively impacted results in the second quarter, particularly that of the Flat-Rolled and European segments. Better average prices are expected to be realized in the second half of 2016. Management’s focus on the Carnegie Way initiative is also helping it improve the business model and is expected to help make the company profitable.
CEO Mario Longhi said that the company will remain focused on improving its cost structure and is making progress on its Carnegie Way program.
If the prevailing market conditions (including spot prices and import volumes) remain at their current levels, the company expects adjusted earnings before interest, income taxes, depreciation and amortization (EBITDA) for 2016 to be around $850 million, much higher than the $400 million guidance stated last quarter. If market conditions change (which the company expects can occur during the balance of 2016), U.S. Steel sees adjusted EBITDA to change in line with the pace and magnitude of changes in market conditions. The company expects net earnings in 2016 to be roughly $50 million or 34 cents per share.
U.S. Steel expects roughly $400 million of cash benefits from working capital improvements in 2016, mainly associated with better inventory management.
Some other well-ranked stocks in the steel industry include ArcelorMittal (MT - Free Report) , Olympic Steel Inc (ZEUS - Free Report) and Ryerson Holding Corporation (RYI - Free Report) , all currently sporting a Zacks Rank #1 (Strong Buy).
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U.S. Steel (X) Q2 Loss Lower than Expected, Sales Miss
U.S. Steel (X - Free Report) reported a narrower loss of $46 million or 32 cents per share in the second quarter of 2016, benefiting from better market conditions. The steel giant had recorded a loss of $261 million or $1.79 per share a year ago.
Barring one-time items, loss was 31 cents per share for the reported quarter, narrower than the Zacks Consensus Estimate of a loss of 55 cents.
Revenues tumbled roughly 10.9% year over year to $2,584 million in the second quarter, hit by lower year-over-year selling prices. Sales also missed the Zacks Consensus Estimate of $2,663 million. Total steel shipments remained relatively flat year over year in the quarter.
In the reported quarter, U.S. Steel fared better than the prior-year quarter as well as the preceding quarter. Market conditions improved and the company’s European segment saw best results since third-quarter 2008. Management’s focus on improving the cost structure also led to an improvement in margins.
Segment Highlights
U.S. Steel’s Flat-Rolled segment recorded a profit of $6 million against a loss of $64 million in the year-ago quarter, due to improved steel prices throughout the reported quarter. While shipments in the quarter remained relatively stable year over year, average realized prices fell to $642 per ton from $695 per ton a year ago.
The U.S. Steel Europe (“USSE”) segment posted a profit of $55 million in the reported quarter, higher than $20 million recorded a year ago. Lower average selling price was more than offset by higher shipments, better prices of raw materials, operating efficiencies and more Carnegie Way benefits.
U.S. Steel’s Tubular segment registered a loss of $78 million in the quarter, wider than a loss of $66 million a year ago, due to lower prices and shipments. Shipments were adversely affected by lower average rig counts.
Financials
U.S. Steel exited the quarter with cash and cash equivalents of $820 million, down 32.2% year over year. Long term debt decreased by 2.1% year over year to $3,058 million. Cash provided by operating activities climbed around 107.3% year over year to $313 million for the first half of 2016.
Outlook
Moving ahead, U.S. Steel envisions further improvement in market conditions for its Flat-Rolled and European divisions. Recent favorable preliminary trade rulings (that led to levy of heavy tariffs on imports) on steel trade cases have been a catalyst for improved domestic market conditions. Further, the recent rise in prices positively impacted results in the second quarter, particularly that of the Flat-Rolled and European segments. Better average prices are expected to be realized in the second half of 2016. Management’s focus on the Carnegie Way initiative is also helping it improve the business model and is expected to help make the company profitable.
CEO Mario Longhi said that the company will remain focused on improving its cost structure and is making progress on its Carnegie Way program.
If the prevailing market conditions (including spot prices and import volumes) remain at their current levels, the company expects adjusted earnings before interest, income taxes, depreciation and amortization (EBITDA) for 2016 to be around $850 million, much higher than the $400 million guidance stated last quarter. If market conditions change (which the company expects can occur during the balance of 2016), U.S. Steel sees adjusted EBITDA to change in line with the pace and magnitude of changes in market conditions. The company expects net earnings in 2016 to be roughly $50 million or 34 cents per share.
U.S. Steel expects roughly $400 million of cash benefits from working capital improvements in 2016, mainly associated with better inventory management.
UTD STATES STL Price, Consensus and EPS Surprise
UTD STATES STL Price, Consensus and EPS Surprise | UTD STATES STL Quote
Zacks Rank
U.S. Steel has a Zacks Rank #2 (Buy).
Some other well-ranked stocks in the steel industry include ArcelorMittal (MT - Free Report) , Olympic Steel Inc (ZEUS - Free Report) and Ryerson Holding Corporation (RYI - Free Report) , all currently sporting a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>