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U.S. Steel Corporation (X - Analyst Report), the largest integrated steel producer in the U.S., posted adjusted earnings (excluding one time charges) of 41 cents per share in the third quarter of 2012, surpassing the Zacks Consensus Estimate of a break even result on per share basis.

The company’s reported net income doubled to $44 million or 28 cents per share from $22 million or 15 cents per share registered in the prior year quarter. The bottom line was boosted by a tax benefit of $27 million.

Revenues came down 8.4% year over year to $4,652 million in the quarter and missed the Zacks Consensus Estimate of $4,658 million. The company faced challenging economic conditions and pricing pressure in the third quarter.

Segment Highlights

Profits from the Flat-rolled segment dropped almost 85.7% year over year to $29 million. A drop in average realized price of steel to $741/net ton in the quarter from $773/ net ton last year led to the massive decline in profit. Sequentially, price declined $31 per ton due to price decreases for domestic scrap as well as raw material price increases. The segment was adversely affected by increased import levels.

U.S. Steel Europe (“USSE”) raked in a profit of $27 million in the quarter, which represents a significant improvement over last year’s loss of $50 million. Average realized price declined 15.2% year over year and 4.7% sequentially to $731 per ton due to due to weaker spot market prices.

Shipments of 911,000 tons in the quarter also declined 23.8% from the year ago quarter and 4.6% sequentially. Continued conservative buying pattern by service centers and distributors, reduced automotive production schedules and the normal summer holiday outages led to the decline in shipments.

U.S. Steel’s Tubular segment’s profit plunged 23.9% year over year to $102 million. Average realized price declined 1.4% annually and 1.8% sequentially to $1,676 per net ton due to increased import levels. Shipments fell almost 5% on a yearly basis and 7.3% sequentially as end users adjusted their drilling plans and curtailed spending due to economic uncertainty and concern over energy prices.

Financial Performance

As of September 30, 2012, U. S. Steel had $536 million of cash compared with $408 million as of December 31, 2011. Long-term debt stood at $3.9 billion as of September 30, 2012, compared with $3.8 billion as of December 31, 2011.

Outlook and Recommendation

For the fourth quarter of 2012, US Steel expects results to be affected by continued weakness in the European and emerging market economies and the economic uncertainty in North America. The company expects the Flat Rolled segment to post losses in the upcoming quarter due to slightly lower average realized prices, as well as lower shipments and higher operating costs.

The USSE segment is expected to break even in the fourth quarter. Average realized prices as well as shipments are expected to decrease compared with the third quarter.

The Tubular segment is anticipated to reap profits but is expected to remain below the third quarter results. Average realized prices are expected to be lower and shipments are projected to be significantly lower than the third quarter as imports continue at high levels.

The company, which competes with ArcelorMittal (MT - Analyst Report) and POSCO (PKX - Analyst Report), currently retains a short-term Zacks #5 Rank (Strong Sell). Currently, we have a long-term (more than 6 months) Neutral recommendation on the stock.

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