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U.S. Steel (X) Gears Up for Q3 Earnings: What's in the Cards?
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United States Steel Corporation (X - Free Report) is scheduled to come up with its third-quarter 2018 results after the bell on Nov 1.
The steel giant logged net earnings of $214 million or $1.20 per share in the second quarter, down from $261 million or $1.48 in the year-ago quarter. Adjusted earnings of $1.46 per share topped the Zacks Consensus Estimate of $1.15.
Revenues rose roughly 15% year over year to $3,609 million, also surpassing the Zacks Consensus Estimate of $3,389.8 million.
U.S. Steel has an impressive earnings surprise history. It has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 21.6%.
Shares of U.S. Steel are down around 26.8% so far this year, underperforming the industry’s decline of roughly 17%.
Can the company surprise investors again or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.
Factors to Watch For
U.S. Steel, in August, raised its adjusted EBITDA guidance for 2018 to roughly $1.85-$1.90 billion (from of $1.7-$1.8 billion), factoring in the success of its $2-billion asset revitalization program.
The company also expects adjusted EBITDA for the third quarter of 2018 at roughly $525 million. Results in the company’s Flat-rolled segment are forecast to witness consistent improvement as more of its adjustable contract and spot shipments realize the benefit of improvement in the second quarter in index prices. However, these are expected to be partly offset by higher planned outage costs.
The company expects positive results in the Tubular division as selling price hikes catch up the rising substrate costs. Results in the European segment are projected to decline in the third quarter due to planned outages and normal seasonal customer demand patterns.
The Zacks Consensus Estimate for revenues for U.S. Steel for the third quarter is $3,706 million, reflecting an expected increase of roughly 14.1% on a year over year basis.
Net sales for U.S. Steel’s Flat-Rolled segment is projected to see an 20.7% year over year increase as the Zacks Consensus Estimate for the third quarter is pegged at $2,765 million. The Zacks Consensus Estimate for net sales for the U.S. Steel Europe (USSE) unit is pegged at $698 million, reflecting a 1.8% decline from the year-ago quarter. Moreover, the company’s Tubular segment’s net sales for the third quarter are expected to rise 15.2% on a year over year basis, as the Zacks Consensus Estimate is $318 million.
With respect to pricing, the Zacks Consensus Estimate for average realized price for the Flat-Rolled unit for the third quarter is pegged at $846 per net ton, which represents an expected 16.2% rise from the year-ago quarter. The Zacks Consensus Estimate for average realized price for the USSE unit is $679 per net ton, representing an expected 6.3% rise on year over year basis. Average realized price for the Tubular segment is expected to increase around 6.6% year over year as the Zacks Consensus Estimate is $1,527 per net ton.
The 25% tariffs on steel imports, which the Trump administration levied in March, have provided a boost to U.S. steel prices. Higher steel prices supported the performance of U.S. Steel in the second quarter and the momentum is likely to continue in the third quarter.
U.S. Steel also remains focused on improving its cost structure and operations on a sustainable basis through its “Carnegie Way” initiative that includes actions such as manufacturing process/logistics improvements and savings on SG&A costs.
As part of the Carnegie Way initiative, the company is implementing an asset revitalization plan aimed at improving its profitability and competitiveness. Carnegie Way actions are expected to deliver meaningful benefits.
However, an increase in maintenance and outage costs (of roughly $50 million compared with the second quarter) are expected to unfavorably impact EBITDA of the Flat-Rolled unit in the third quarter. This is partly due to a significant blast furnace outage at the Great Lakes Works facility in the quarter.
U.S. Steel also sees lower EBITDA on a sequential comparison basis in its USSE segment in the third quarter. Lower seasonal customer demand patterns in the European markets and planned outages are expected to impact results in this division. The company expects outage costs to rise roughly $20 million in the third quarter.
United States Steel Corporation Price and EPS Surprise
Our proven model does not conclusively show that U.S. Steel is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:
Earnings ESP: Earnings ESP for U.S. Steel is currently pegged at -2.47%. This is because the Most Accurate Estimate stands at $1.74 while the Zacks Consensus Estimate is pegged at $1.79. 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, which when combined with a negative ESP, makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
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:
Nutrien Ltd. (NTR - Free Report) has an Earnings ESP of +10.43% and carries a Zacks Rank #2.
Domtar Corporation has an Earnings ESP of +7.90% and carries a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
U.S. Steel (X) Gears Up for Q3 Earnings: What's in the Cards?
United States Steel Corporation (X - Free Report) is scheduled to come up with its third-quarter 2018 results after the bell on Nov 1.
The steel giant logged net earnings of $214 million or $1.20 per share in the second quarter, down from $261 million or $1.48 in the year-ago quarter. Adjusted earnings of $1.46 per share topped the Zacks Consensus Estimate of $1.15.
Revenues rose roughly 15% year over year to $3,609 million, also surpassing the Zacks Consensus Estimate of $3,389.8 million.
U.S. Steel has an impressive earnings surprise history. It has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 21.6%.
Shares of U.S. Steel are down around 26.8% so far this year, underperforming the industry’s decline of roughly 17%.
Can the company surprise investors again or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.
Factors to Watch For
U.S. Steel, in August, raised its adjusted EBITDA guidance for 2018 to roughly $1.85-$1.90 billion (from of $1.7-$1.8 billion), factoring in the success of its $2-billion asset revitalization program.
The company also expects adjusted EBITDA for the third quarter of 2018 at roughly $525 million. Results in the company’s Flat-rolled segment are forecast to witness consistent improvement as more of its adjustable contract and spot shipments realize the benefit of improvement in the second quarter in index prices. However, these are expected to be partly offset by higher planned outage costs.
The company expects positive results in the Tubular division as selling price hikes catch up the rising substrate costs. Results in the European segment are projected to decline in the third quarter due to planned outages and normal seasonal customer demand patterns.
The Zacks Consensus Estimate for revenues for U.S. Steel for the third quarter is $3,706 million, reflecting an expected increase of roughly 14.1% on a year over year basis.
Net sales for U.S. Steel’s Flat-Rolled segment is projected to see an 20.7% year over year increase as the Zacks Consensus Estimate for the third quarter is pegged at $2,765 million. The Zacks Consensus Estimate for net sales for the U.S. Steel Europe (USSE) unit is pegged at $698 million, reflecting a 1.8% decline from the year-ago quarter. Moreover, the company’s Tubular segment’s net sales for the third quarter are expected to rise 15.2% on a year over year basis, as the Zacks Consensus Estimate is $318 million.
With respect to pricing, the Zacks Consensus Estimate for average realized price for the Flat-Rolled unit for the third quarter is pegged at $846 per net ton, which represents an expected 16.2% rise from the year-ago quarter. The Zacks Consensus Estimate for average realized price for the USSE unit is $679 per net ton, representing an expected 6.3% rise on year over year basis. Average realized price for the Tubular segment is expected to increase around 6.6% year over year as the Zacks Consensus Estimate is $1,527 per net ton.
The 25% tariffs on steel imports, which the Trump administration levied in March, have provided a boost to U.S. steel prices. Higher steel prices supported the performance of U.S. Steel in the second quarter and the momentum is likely to continue in the third quarter.
U.S. Steel also remains focused on improving its cost structure and operations on a sustainable basis through its “Carnegie Way” initiative that includes actions such as manufacturing process/logistics improvements and savings on SG&A costs.
As part of the Carnegie Way initiative, the company is implementing an asset revitalization plan aimed at improving its profitability and competitiveness. Carnegie Way actions are expected to deliver meaningful benefits.
However, an increase in maintenance and outage costs (of roughly $50 million compared with the second quarter) are expected to unfavorably impact EBITDA of the Flat-Rolled unit in the third quarter. This is partly due to a significant blast furnace outage at the Great Lakes Works facility in the quarter.
U.S. Steel also sees lower EBITDA on a sequential comparison basis in its USSE segment in the third quarter. Lower seasonal customer demand patterns in the European markets and planned outages are expected to impact results in this division. The company expects outage costs to rise roughly $20 million in the third quarter.
United States Steel Corporation Price and EPS Surprise
United States Steel Corporation price-eps-surprise | United States Steel Corporation Quote
Earnings Whispers
Our proven model does not conclusively show that U.S. Steel is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:
Earnings ESP: Earnings ESP for U.S. Steel is currently pegged at -2.47%. This is because the Most Accurate Estimate stands at $1.74 while the Zacks Consensus Estimate is pegged at $1.79. 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, which when combined with a negative ESP, makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
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:
CF Industries Holdings, Inc. (CF - Free Report) has an Earnings ESP of +36.36% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nutrien Ltd. (NTR - Free Report) has an Earnings ESP of +10.43% and carries a Zacks Rank #2.
Domtar Corporation has an Earnings ESP of +7.90% and carries a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>