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Why Is U.S. Steel (X) Down 15.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for United States Steel (X - Free Report) . Shares have lost about 15.1% 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's Q3 Earnings In Line, Sales Beat Estimates

U.S. Steel 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 company 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.

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%.

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.
 

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 -13.49% due to these changes.

VGM Scores

At this time, U.S. Steel has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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