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Why Is U.S. Steel (X) Down 8.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for United States Steel (X - Free Report) . Shares have lost about 8.5% in that time frame, underperforming the S&P 500.

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

U.S. Steel Beats Q2 Earnings Estimates, Raises '18 View

U.S. Steel reported 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. Barring one-time items, adjusted earnings came in at $1.46, beating the Zacks Consensus Estimate of $1.15.

Revenues rose roughly 14.8% year over year to $3,609 million in the quarter. The figure also surpassed the Zacks Consensus Estimate of $3,389.8 million.

Segment Highlights

Flat-Rolled: Profit in the Flat-Rolled segment was $224 million in the quarter, up from $220 million in the year-ago quarter.

Total steel shipments in the segment rose roughly 3.5% year over year to 2,584,000 tons and average realized price per ton in the unit was $819, up roughly 10.4%.

USSE: The USSE segment delivered a profit of $115 million, a more than two-fold jump year over year from $55 million. Total shipments in the segment fell modestly to 1,156,000 tons from 1,157,000 tons in the year-ago quarter and average realized price per ton for the unit was $707, up roughly 14% year over year.

Tubular: U.S. Steel’s Tubular segment incurred a loss of $35 million, wider than a loss of $29 million in the year-ago quarter.

Total steel shipments for the segment rose roughly 11.7% year over year to 201,000 tons and average realized price per ton for the unit was $1,449, up roughly 17.4%.

Financials

As of Jun 30, 2018, U.S. Steel had cash and cash equivalents of $1,231 million, down 19.1% from the prior-year quarter.

Long-term debt fell roughly 7.7% year over year to $2,541 million.  

Outlook

U.S. Steel expects adjusted EBITDA for the third quarter of 2018 at roughly $525 million. The company has raised 2018 adjusted EBITDA guidance to roughly $1.85-$1.90 billion (from of $1.7-$1.8 billion), based on its developments to date and including the success of its $2-billion asset revitalization program.

Flat-rolled segment results are expected 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 will 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 likely to decline in the third quarter due to planned outages and normal seasonal customer demand patterns.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.37% due to these changes.

VGM Scores

At this time, U.S. Steel has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value, growth, and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, U.S. Steel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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