We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is U.S. Steel (X) Stock Dropping After Impressive Earnings?
Read MoreHide Full Article
U.S. Steel Corporation (X - Free Report) released its second-quarter earnings on August 1 after the market closed. The major steel producer had some impressive results, but surprisingly shares are significantly down the day after the earnings beat.
For the quarter, U.S. Steel posted earnings of $1.46 per share, beating the Zacks Consensus Estimate of $1.15 per share. The company’s quarterly revenues of $3.61 billion also surpassed the Zacks Consensus Estimate by 6.47%.
U.S. Steel has now been able to beat earnings and revenue estimates for the last four quarters. Moving forward, the company also raised its full-year 2018 EBITDA guidance to $1.85-$1.9 billion.
The stellar second-quarter appears to indicate that Trump administration tariffs of 25% on most imported steel and 10% on aluminum imports are working in the steelmaker’s favor. This has decreased competition from imported steel and has allowed U.S. Steel to raise their own prices. On the earnings call, CEO David Burritt stated, “My view is that he [President Donald Trump] will continue to be supportive he gave every indication of that.”
Success for steel producers hasn’t only been limited to U.S. Steel, as profits more than doubled in the second-quarter for Nucor (NUE - Free Report) and Reliance Steel & Aluminum (RS - Free Report) had a positive 14.39% earnings surprise. Relative to these peers, U.S. steel has had a better performance in the last 12 months.
Typically, an earnings beat, strong guidance, and favorable market conditions would drive share prices up. However, that hasn’t been the case so far. Shares of U.S. Steel are down 9.91% in late afternoon trading hours on Aug 2, the day after its earnings report.
Although it is difficult to exactly know why the market has reacted this way, there are a couple possible answers.
U.S. Steel adjusted its Q3 EBITDA to $525 million, down from market expectations. The full-year guidance was raised, but investors may have thought that a strong Q3 outlook was crucial, especially with rising steel prices.
While shares have dropped since the earnings report, this could also just be a temporary dip. In the long-term, U.S. Steel remarked that it has made progress with its $2 billion flat-rolled segment asset revitalization program, to be completed in 2020. The company expects the program to improve EBITDA by $275-$325 annually by then.
But for now, the market doesn’t share that optimism.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.And this outperformance has not just been a recent phenomenon.
Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Image: Bigstock
Why Is U.S. Steel (X) Stock Dropping After Impressive Earnings?
U.S. Steel Corporation (X - Free Report) released its second-quarter earnings on August 1 after the market closed. The major steel producer had some impressive results, but surprisingly shares are significantly down the day after the earnings beat.
For the quarter, U.S. Steel posted earnings of $1.46 per share, beating the Zacks Consensus Estimate of $1.15 per share. The company’s quarterly revenues of $3.61 billion also surpassed the Zacks Consensus Estimate by 6.47%.
U.S. Steel has now been able to beat earnings and revenue estimates for the last four quarters. Moving forward, the company also raised its full-year 2018 EBITDA guidance to $1.85-$1.9 billion.
The stellar second-quarter appears to indicate that Trump administration tariffs of 25% on most imported steel and 10% on aluminum imports are working in the steelmaker’s favor. This has decreased competition from imported steel and has allowed U.S. Steel to raise their own prices. On the earnings call, CEO David Burritt stated, “My view is that he [President Donald Trump] will continue to be supportive he gave every indication of that.”
Success for steel producers hasn’t only been limited to U.S. Steel, as profits more than doubled in the second-quarter for Nucor (NUE - Free Report) and Reliance Steel & Aluminum (RS - Free Report) had a positive 14.39% earnings surprise. Relative to these peers, U.S. steel has had a better performance in the last 12 months.
Typically, an earnings beat, strong guidance, and favorable market conditions would drive share prices up. However, that hasn’t been the case so far. Shares of U.S. Steel are down 9.91% in late afternoon trading hours on Aug 2, the day after its earnings report.
Although it is difficult to exactly know why the market has reacted this way, there are a couple possible answers.
U.S. Steel adjusted its Q3 EBITDA to $525 million, down from market expectations. The full-year guidance was raised, but investors may have thought that a strong Q3 outlook was crucial, especially with rising steel prices.
Moreover, there may also still be some uncertainty regarding the current trade climate. President Trump recently met with European Commission President Jean-Claude Juncker to reconsider the steel and aluminum tariffs. Worries surrounding trade talks and the overall political climate could be overpowering the earnings results.
While shares have dropped since the earnings report, this could also just be a temporary dip. In the long-term, U.S. Steel remarked that it has made progress with its $2 billion flat-rolled segment asset revitalization program, to be completed in 2020. The company expects the program to improve EBITDA by $275-$325 annually by then.
But for now, the market doesn’t share that optimism.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.And this outperformance has not just been a recent phenomenon.
Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>