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U.S. Steel's (X) Q3 Earnings In Line, Sales Beat Estimates

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United States Steel Corporation (X - Free Report) saw higher profits in the third quarter of 2018, driven by a significant increase in earnings in its Flat-Rolled unit and higher steel prices.

The steel maker logged net earnings of $291 million or $1.62 per share for the quarter, up roughly 98% from $147 million or 83 cents in the year-ago quarter. Barring one-time items, adjusted earnings came in at $1.79 a share, matching the Zacks Consensus Estimate.

Revenues rose roughly 15% year over year to $3,729 million in the quarter, exceeding the Zacks Consensus Estimate of $3,706.1 million.

United States Steel Corporation Price, Consensus and EPS Surprise

 

United States Steel Corporation Price, Consensus and EPS Surprise

United States Steel Corporation price-consensus-eps-surprise-chart | United States Steel Corporation Quote

Segment Highlights

Flat-Rolled: Profit in the Flat-Rolled segment was $305 million in the quarter, up around 89% from $161 million in the year-ago quarter.

Total steel shipments in the segment rose roughly 5% year over year to 2,659,000 tons and average realized price per ton in the unit was $859, up roughly 18%.

U. S. Steel Europe (USSE): The USSE segment delivered a profit of $72 million, down modestly from $73 million a year ago. Total shipments in the segment went up 3% year over year to 1,101,000 tons and average realized price per ton for the unit was $669, up roughly 5% year over year.

Tubular: U.S. Steel’s Tubular segment swung to a profit of $7 million from a loss of $7 million in the year-ago quarter.

Total steel shipments for the segment was essentially flat year over year at 184,000 tons. Average realized price per ton for the unit was $1,602, up roughly 12%.

Financials

U.S. Steel ended the quarter with cash and cash equivalents of $1,344 million, down around 21% from the prior-year quarter.

Long-term debt fell roughly 14% year over year to $2,498 million.  

Outlook

U.S. Steel is seeing strong market conditions with stable end-user steel consumption. However, the company is witnessing lower customer order rates due to falling spot and index prices. It expects strong steel demand to support favorable market conditions going into 2019.

U.S. Steel expects adjusted EBITDA for the fourth quarter of 2018 at roughly $575 million. The company now expects adjusted EBITDA for 2018 to be roughly $1.8 billion compared with its earlier view of around $1.85-$1.90 billion.

The company envisions results in the Flat-rolled unit to continue to improve on the back of higher shipments and reduced maintenance and outage costs, partly masked by lower average realized prices.

For the Tubular unit, U.S. Steel sees results to improve mainly due to higher shipments, partly offset by lower average realized prices. However, it expects results in the European segment to decline due to inventory revaluation adjustments associated with volatility in raw material prices.

Price Performance

Shares of U.S. Steel have lost 22.7% so far this year, underperforming the industry’s 14.9% decline.



 

Zacks Rank and Stocks to Consider

U.S. Steel currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include Methanex Corporation (MEOH - Free Report) , KMG Chemicals, Inc. (KMG - Free Report) and CF Industries Holdings, Inc. (CF - Free Report) , each carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex has an expected long-term earnings growth rate of 15%. The company’s shares have rallied around 29% over a year.

KMG Chemicals has an expected long-term earnings growth rate of 28.5%. The company’s shares are up roughly 39% over a year.

CF Industries has an expected long-term earnings growth rate of 6%. The company’s shares have gained around 32% in a year’s time.

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