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United States Steel (X) Down 5.1% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for United States Steel Corporation (X - Free Report) . Shares have lost about 5.1%  in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is X due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

U.S. Steel's Q1 Earnings and Revenues Beat Estimates

U.S. Steel swung to a profit in first-quarter 2018, backed by improved results across all three of its reportable segments.

The company reported net earnings of $18 million or 10 cents per share in the quarter against net loss of $180 million or $1.03 recorded a year ago. Barring one-time items, adjusted earnings came in at 32 cents per share that beat the Zacks Consensus Estimate of earnings of 29 cents.

Revenues rose roughly 15.6% year over year to $3,149 million in the quarter. The figure also surpassed the Zacks Consensus Estimate of $3,100.5 million.

Segment Highlights

Flat-Rolled: U.S. Steel’s Flat-Rolled segment recorded a profit of $33 million in the first quarter against a net loss of $88 million a year ago.

Total steel shipments for the segment rose roughly 5.4% year over year to 2,534,000 tons and average realized price per ton for the unit was $740, up roughly 2.9%.

USSE: The USSE segment posted a profit of $110 million in the quarter, up 26.4% year over year. Total shipments for the segment rose roughly 1.6% to 1,127,000 tons and average realized price per ton for the unit was $707, up roughly 19% year over year.

Tubular: U.S. Steel’s Tubular segment incurred a loss of $27 million in the quarter, which was much narrower than a loss of $57 million recorded a year ago.

Total steel shipments for the segment rose roughly 24.3% year over year to 179,000 tons and average realized price per ton for the unit was $1,387, up roughly 26.4%.

Financials

U.S. Steel ended the first quarter with cash and cash equivalents of $1,372 million, up 3.5% from the prior-year quarter.

Long-term debt decreased roughly 6.6% year over year to $2,571 million.  

Outlook

U.S. Steel stated that it is beginning the second year of its asset revitalization program and is already witnessing the benefits from the investments in its assets. The company remains focused on managing operating volatility and believes that the restart of steelmaking facility at Granite City will increase its ability to do so.

There are uncertainties surrounding how product exclusion and country exemption requests related to Section 232 will be resolved, U.S. Steel noted. However, the company will continue investing in revitalizing its assets and developing innovative customer solutions. It is also confident of delivering its 2020 performance goals.

However, the company is presently experiencing some operational challenges at its steelmaking facility at Great Lakes Works. As a result, it expects to have an unfavorable EBITDA impact of roughly $30 million on second-quarter results. U.S. Steel believes that adjusted EBITDA in the second quarter will be roughly $400 million while the same for full-year 2018 is expected to be roughly $1.7-$1.8 billion

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to four lower. In the past month, the consensus estimate has shifted lower by 20.7% due to these changes.

VGM Scores

At this time, X has a subpar Growth Score of D and it lags on the momentum front with a score of F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our style scores.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, X has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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