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U.S. Steel (X) Q3 Earnings Preview: Is a Surprise in Store?
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U.S. Steel (X - Free Report) is set to release its third-quarter 2016 results after the bell on Nov 1.
The steel giant posted a narrower loss in the second quarter of 2016 as it benefited from improved market conditions. Adjusted loss was lower than the Zacks Consensus Estimate (a 43.64% positive surprise). Management’s focus on improving the cost structure led to an improvement in margins. Revenues, however, fell by double digits year over year, and missed expectations.
U.S. Steel beat the Zacks Consensus Estimate in 2 of the trailing 4 quarters while missing on two occasions with an average negative surprise of 25.02%. Let’s see how things are shaping up for this announcement.
Factors to Consider
U.S. Steel, in its second-quarter 2016 call, said that it envisions further improvement in market conditions for its Flat-Rolled and European divisions. Recent favorable preliminary trade rulings on steel trade cases have been a catalyst for improved domestic market conditions. The company also expects to gain from increased prices for flat-rolled products in second-half 2016.
Steel market conditions have improved lately, driven by favorable developments on steel trade cases in the recent past, providing some reprieve to U.S. steel producers. Steel prices also recovered during the second quarter, helped by punitive trade actions that led to levy of tariffs on imports.
U.S. Steel is seeing strong demand in the automotive space, a key end-use market for steel. Moreover, the company is aggressively pursuing actions to improve its cost structure through its “Carnegie Way” program that should lend support to its September quarter results.
The Carnegie Way program is expected to generate meaningful benefits in 2016. U.S. Steel also expects roughly $400 million of cash benefits from working capital improvements in 2016, mainly associated with better inventory management.
However, depressed oil prices are still hurting the company’s business in the energy market. The low oil price environment has prompted several energy companies to dial back drilling plans. U.S. Steel’s Tubular segment registered a loss in the second quarter as shipments were hurt by lower average rig counts.
Earnings Whispers
Our proven model shows that U.S. Steel is likely to beat earnings because it has the right combination of the two key ingredients.
Zacks ESP: The Earnings ESP for U.S. Steel is +15.91% as the Most Accurate Estimate stands at $1.02 while the Zacks Consensus Estimate is pegged at 88 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: U.S. Steel currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings.
Conversely, sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.
The combination of U.S. Steel’s Zacks Rank #3 and positive ESP makes us reasonably confident of an earnings beat.
Here are some stocks in the basic materials space that you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
Cabot Corporation (CBT - Free Report) holds a Zacks Rank #2 and has Earnings ESP of +7.45%.
Olin Corp. (OLN - Free Report) has Earnings ESP of +6.06% and carries a Zacks Rank #3.
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U.S. Steel (X) Q3 Earnings Preview: Is a Surprise in Store?
U.S. Steel (X - Free Report) is set to release its third-quarter 2016 results after the bell on Nov 1.
The steel giant posted a narrower loss in the second quarter of 2016 as it benefited from improved market conditions. Adjusted loss was lower than the Zacks Consensus Estimate (a 43.64% positive surprise). Management’s focus on improving the cost structure led to an improvement in margins. Revenues, however, fell by double digits year over year, and missed expectations.
U.S. Steel beat the Zacks Consensus Estimate in 2 of the trailing 4 quarters while missing on two occasions with an average negative surprise of 25.02%. Let’s see how things are shaping up for this announcement.
Factors to Consider
U.S. Steel, in its second-quarter 2016 call, said that it envisions further improvement in market conditions for its Flat-Rolled and European divisions. Recent favorable preliminary trade rulings on steel trade cases have been a catalyst for improved domestic market conditions. The company also expects to gain from increased prices for flat-rolled products in second-half 2016.
Steel market conditions have improved lately, driven by favorable developments on steel trade cases in the recent past, providing some reprieve to U.S. steel producers. Steel prices also recovered during the second quarter, helped by punitive trade actions that led to levy of tariffs on imports.
U.S. Steel is seeing strong demand in the automotive space, a key end-use market for steel. Moreover, the company is aggressively pursuing actions to improve its cost structure through its “Carnegie Way” program that should lend support to its September quarter results.
The Carnegie Way program is expected to generate meaningful benefits in 2016. U.S. Steel also expects roughly $400 million of cash benefits from working capital improvements in 2016, mainly associated with better inventory management.
However, depressed oil prices are still hurting the company’s business in the energy market. The low oil price environment has prompted several energy companies to dial back drilling plans. U.S. Steel’s Tubular segment registered a loss in the second quarter as shipments were hurt by lower average rig counts.
Earnings Whispers
Our proven model shows that U.S. Steel is likely to beat earnings because it has the right combination of the two key ingredients.
Zacks ESP: The Earnings ESP for U.S. Steel is +15.91% as the Most Accurate Estimate stands at $1.02 while the Zacks Consensus Estimate is pegged at 88 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: U.S. Steel currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings.
Conversely, sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.
The combination of U.S. Steel’s Zacks Rank #3 and positive ESP makes us reasonably confident of an earnings beat.
UTD STATES STL Price and EPS Surprise
UTD STATES STL Price and EPS Surprise | UTD STATES STL Quote
Stocks That Warrant a Look
Here are some stocks in the basic materials space that you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
The Chemours Company (CC - Free Report) has an Earnings ESP of +25.71% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cabot Corporation (CBT - Free Report) holds a Zacks Rank #2 and has Earnings ESP of +7.45%.
Olin Corp. (OLN - Free Report) has Earnings ESP of +6.06% and carries a Zacks Rank #3.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>