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U.S. Steel to Prioritize Cash Flows Amid Coronavirus Pandemic
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United States Steel Corporation (X - Free Report) is undertaking measures in response to impacts from the coronavirus outbreak as well as the volatility in global oil and gas markets. The company’s actions will strengthen its ability to serve customers, suppliers and create long-term value for investors.
U.S. Steel will maintain strategic flexibility by prioritizing cash and liquidity. This will enable the company to stay prepared until the global economy recovers from the current situation. Some of the important short-term actions announced by the company are discussed as follows:
North American Flat-rolled Actions: U.S. Steel will immediately idle the #4 blast furnace at Gary Works as part of its planned outage, which was originally scheduled to start in April 2020. Moreover, the Gary #4 blast furnace is expected to remain idled until market conditions improve.
Tubular Actions: In response to weak tubular market conditions, the company will indefinitely idle all or most of Lone Star Tubular Operations and Lorain Tubular Operations starting late-May. Persistently high levels of imports and lower demand stemming from sudden drop in oil prices are major hurting the tubular market.
Lowered Capital Expenditure: U.S. Steel is reducing its capital spending for 2020 by $125 million. It now expects to spend roughly $750 million for the year. The move is likely to hurt its strategic projects.
For instance, the investment in a new non-grain oriented electrical steel line at USSE is expected to be delayed. The construction of the endless casting and rolling line and cogeneration facility at the company’s Mon Valley Works is also expected to be delayed due to reduction in capital spending.
The company has also halted planned upgrades at Gary Hot Strip Mill. However, it will continue to evaluate the timeline and pace for completing the remaining investments at the project.
Revolving Credit Facility: The company increased its borrowings under the revolving credit facility as a precautionary step by $800 million. The move will boost its cash position and preserve financial flexibility.
The company stated that these actions are not expected to affect its first-quarter adjusted EBITDA or the bottom line. However, considering rapid change in market dynamics, the company is monitoring and updating impacts to first quarter shipments. While the company anticipates a considerable reduction in demand for the fiscal, an updated estimate cannot be ascertained presently.
U.S. Steel is monitoring the operational and financial impacts of the coronavirus on its business. It intends to provide more details in first-quarter 2020 earnings call.
Shares of U.S. Steel have plunged 71.3% in the past year compared with the industry’s 50.2% decline.
Zacks Rank & Key Picks
U.S. Steel currently carries a Zacks Rank #3 (Hold).
Newmont has an expected earnings growth rate of 97% for 2020. The company’s shares have gained 30.1% in the past year.
Franco-Nevada has an expected earnings growth rate of 24.7% for 2020. Its shares have returned 34.8% in the past year.
Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. The company’s shares have surged 91.2% in the past year.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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U.S. Steel to Prioritize Cash Flows Amid Coronavirus Pandemic
United States Steel Corporation (X - Free Report) is undertaking measures in response to impacts from the coronavirus outbreak as well as the volatility in global oil and gas markets. The company’s actions will strengthen its ability to serve customers, suppliers and create long-term value for investors.
U.S. Steel will maintain strategic flexibility by prioritizing cash and liquidity. This will enable the company to stay prepared until the global economy recovers from the current situation. Some of the important short-term actions announced by the company are discussed as follows:
North American Flat-rolled Actions: U.S. Steel will immediately idle the #4 blast furnace at Gary Works as part of its planned outage, which was originally scheduled to start in April 2020. Moreover, the Gary #4 blast furnace is expected to remain idled until market conditions improve.
Tubular Actions: In response to weak tubular market conditions, the company will indefinitely idle all or most of Lone Star Tubular Operations and Lorain Tubular Operations starting late-May. Persistently high levels of imports and lower demand stemming from sudden drop in oil prices are major hurting the tubular market.
Lowered Capital Expenditure: U.S. Steel is reducing its capital spending for 2020 by $125 million. It now expects to spend roughly $750 million for the year. The move is likely to hurt its strategic projects.
For instance, the investment in a new non-grain oriented electrical steel line at USSE is expected to be delayed. The construction of the endless casting and rolling line and cogeneration facility at the company’s Mon Valley Works is also expected to be delayed due to reduction in capital spending.
The company has also halted planned upgrades at Gary Hot Strip Mill. However, it will continue to evaluate the timeline and pace for completing the remaining investments at the project.
Revolving Credit Facility: The company increased its borrowings under the revolving credit facility as a precautionary step by $800 million. The move will boost its cash position and preserve financial flexibility.
The company stated that these actions are not expected to affect its first-quarter adjusted EBITDA or the bottom line. However, considering rapid change in market dynamics, the company is monitoring and updating impacts to first quarter shipments. While the company anticipates a considerable reduction in demand for the fiscal, an updated estimate cannot be ascertained presently.
U.S. Steel is monitoring the operational and financial impacts of the coronavirus on its business. It intends to provide more details in first-quarter 2020 earnings call.
Shares of U.S. Steel have plunged 71.3% in the past year compared with the industry’s 50.2% decline.
Zacks Rank & Key Picks
U.S. Steel currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space are Newmont Corporation (NEM - Free Report) , Franco-Nevada Corporation (FNV - Free Report) and Novagold Resources Inc. (NG - Free Report) , all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Newmont has an expected earnings growth rate of 97% for 2020. The company’s shares have gained 30.1% in the past year.
Franco-Nevada has an expected earnings growth rate of 24.7% for 2020. Its shares have returned 34.8% in the past year.
Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. The company’s shares have surged 91.2% in the past year.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>