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U.S. Steel (X) Q2 Earnings: Stock to Disappoint Again?
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U.S. Steel (X - Free Report) is set to release its second-quarter 2017 results after the bell on Jul 25.
The steel giant came out with lackluster first-quarter 2017 results in April, missing analysts' estimates on both earnings and revenues. The company suffered a sizable net loss of $180 million on a reported basis in the quarter.
The company’s adjusted loss for the quarter was 83 cents per share, missing the Zacks Consensus Estimate of earnings of 32 cents. Revenues rose roughly 16.4% year over year to $2,725 million in the first quarter, but trailed the Zacks Consensus Estimate of $2,921 million.
U.S. Steel beat the Zacks Consensus Estimate in two of the trailing four quarters, while missing in the other two with an average positive surprise of 557.43%.
U.S. Steel shares have lost around 26.4% over the past six months, compared with roughly 1.9% gain of its industry.
Let’s see how things are shaping up for this announcement.
Factors to Watch For
U.S. Steel, in April, cut its profit guidance for 2017. The company now expects to post net earnings of around $260 million or $1.50 per share in 2017 compared with net earnings of $535 million or $3.08 per share it expected earlier. Moreover, the company cut its EBITDA guidance for the full year to roughly $1.1 billion from its earlier expectations of around $1.3 billion.
U.S. Steel noted that it remains exposed to a cyclical industry and aims to revitalize assets to achieve more reliable and consistent operations, improved quality and cost performance.
The disappointing first-quarter results coupled with the company’s downward guidance revision sparked huge sell-off as U.S. Steel’s shares crashed as much as around 27% a day after the earnings release – the biggest one-day drop since it went public in 1991.
U.S. Steel is implementing an asset revitalization plan aimed at improving its profitability and competitiveness. The plan is expected to take 3-4 years for its full implementation. The company plans to invest around $300 million in asset revitalization in 2017, higher than 2016 level.
However, the company expects more downtime in its facilities this year due to this program that will limit its steel production volumes. Accelerated implementation of this plan is expected to affect flat-rolled shipments volumes in 2017. We expect the company to provide more color on this program in the second-quarter call.
U.S. Steel continues to face certain operational issues in its Flat-Rolled division, which is hurting the results of this unit. Increased outage costs, operating inefficiencies and higher plant maintenance costs hurt this division in the first quarter and remain a headwind in the June quarter. The company sees higher plant-related spending as it accelerates asset revitalization investments and efforts. As such, higher maintenance spending may affect this division in the second quarter.
Nevertheless, U.S. Steel is aggressively pursuing actions to improve its cost structure through its “Carnegie Way” program that may lend some support to its June quarter results. These efforts delivered $745 million of benefits in 2016. The company sees incremental impact from Carnegie Way benefits of $310 million for full-year 2017 as compared with 2016.
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 (Expected Surprise Prediction) 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:
Zacks ESP: The Earnings ESP for U.S. Steel is -23.91% as the Most Accurate Estimate stands at 35 cents while the Zacks Consensus Estimate is pegged at 46 cents. 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 That Warrant a Look
Here are some other 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:
The Chemours Company (CC - Free Report) has an Earnings ESP of +4.44% and a Zacks Rank #2.
Endeavour Silver Corp. (EXK - Free Report) has an Earnings ESP of +100% and a Zacks Rank #3.
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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
U.S. Steel (X) Q2 Earnings: Stock to Disappoint Again?
U.S. Steel (X - Free Report) is set to release its second-quarter 2017 results after the bell on Jul 25.
The steel giant came out with lackluster first-quarter 2017 results in April, missing analysts' estimates on both earnings and revenues. The company suffered a sizable net loss of $180 million on a reported basis in the quarter.
The company’s adjusted loss for the quarter was 83 cents per share, missing the Zacks Consensus Estimate of earnings of 32 cents. Revenues rose roughly 16.4% year over year to $2,725 million in the first quarter, but trailed the Zacks Consensus Estimate of $2,921 million.
U.S. Steel beat the Zacks Consensus Estimate in two of the trailing four quarters, while missing in the other two with an average positive surprise of 557.43%.
U.S. Steel shares have lost around 26.4% over the past six months, compared with roughly 1.9% gain of its industry.
Let’s see how things are shaping up for this announcement.
Factors to Watch For
U.S. Steel, in April, cut its profit guidance for 2017. The company now expects to post net earnings of around $260 million or $1.50 per share in 2017 compared with net earnings of $535 million or $3.08 per share it expected earlier. Moreover, the company cut its EBITDA guidance for the full year to roughly $1.1 billion from its earlier expectations of around $1.3 billion.
U.S. Steel noted that it remains exposed to a cyclical industry and aims to revitalize assets to achieve more reliable and consistent operations, improved quality and cost performance.
The disappointing first-quarter results coupled with the company’s downward guidance revision sparked huge sell-off as U.S. Steel’s shares crashed as much as around 27% a day after the earnings release – the biggest one-day drop since it went public in 1991.
U.S. Steel is implementing an asset revitalization plan aimed at improving its profitability and competitiveness. The plan is expected to take 3-4 years for its full implementation. The company plans to invest around $300 million in asset revitalization in 2017, higher than 2016 level.
However, the company expects more downtime in its facilities this year due to this program that will limit its steel production volumes. Accelerated implementation of this plan is expected to affect flat-rolled shipments volumes in 2017. We expect the company to provide more color on this program in the second-quarter call.
U.S. Steel continues to face certain operational issues in its Flat-Rolled division, which is hurting the results of this unit. Increased outage costs, operating inefficiencies and higher plant maintenance costs hurt this division in the first quarter and remain a headwind in the June quarter. The company sees higher plant-related spending as it accelerates asset revitalization investments and efforts. As such, higher maintenance spending may affect this division in the second quarter.
Nevertheless, U.S. Steel is aggressively pursuing actions to improve its cost structure through its “Carnegie Way” program that may lend some support to its June quarter results. These efforts delivered $745 million of benefits in 2016. The company sees incremental impact from Carnegie Way benefits of $310 million for full-year 2017 as compared with 2016.
United States Steel Corporation Price and EPS Surprise
United States Steel Corporation Price and 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 (Expected Surprise Prediction) 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:
Zacks ESP: The Earnings ESP for U.S. Steel is -23.91% as the Most Accurate Estimate stands at 35 cents while the Zacks Consensus Estimate is pegged at 46 cents. 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 That Warrant a Look
Here are some other 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:
Westlake Chemical Corporation (WLK - Free Report) has an Earnings ESP of +5.04% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Chemours Company (CC - Free Report) has an Earnings ESP of +4.44% and a Zacks Rank #2.
Endeavour Silver Corp. (EXK - Free Report) has an Earnings ESP of +100% and a Zacks Rank #3.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>