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U.S. Steel (X) Up 8.2% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for United States Steel (X). Shares have added about 8.2% in that time frame, outperforming the S&P 500.

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

U.S. Steel’s Earnings and Revenues Beat Estimates in Q2

U.S. Steel slipped to a net loss of $589 million or $3.36 per share in second-quarter 2020 from net earnings of $68 million or 39 cents per share in the year-ago quarter.

Barring one-time items, adjusted loss per share was $2.67 against adjusted earnings per share of 45 cents in the prior-year quarter. The figure was narrower than the Zacks Consensus Estimate of a loss of $2.74.

Revenues fell 41% year over year to $2,091 million in the reported quarter. However, the top line beat the Zacks Consensus Estimate of $1,690.7 million.

Results in the second quarter were affected by the coronavirus pandemic and costs associated with idling of a significant portion of the company’s steelmaking operations.

Segment Highlights

Flat-Rolled: The segment recorded a loss of $329 million in the second quarter against earnings of $134 million in the year-ago quarter.

Steel shipments in the segment fell around 36% year over year to 1,790,000 tons and average realized price per ton in the unit was $721, down roughly 7% year over year.

U.S. Steel Europe: The segment posted a loss of $26 million, wider than a loss of $10 million in the year-ago quarter. Shipments in the segment dropped around 39% year over year to 601,000 tons. Average realized price per ton for the unit was $632, down roughly 3% year over year.

Tubular: The segments posted a loss of $47 million, wider than a loss of $6 million in the year-ago quarter.

Steel shipments declined roughly 32% year over year to 132,000 tons. Average realized price per ton for the unit was $1,288, down around 15% year over year.

Financials

U.S. Steel ended the quarter with cash and cash equivalents of $2,300 million, a more than three-fold year-over-year increase. Long-term debt rose roughly 135% year over year to $5,505 million.

Outlook

Moving ahead, U.S. Steel said that it is encouraged by the recovery in market conditions as automotive original equipment manufacturers are approaching normal production levels and healthy order activity has continued into the third quarter. The company also expects construction demand to remain strong, especially for value-add construction products.

U.S. Steel has also restarted two blast furnaces to rapidly respond to increasing activity. While the company is encouraged by the rising pace of incoming orders across its steelmaking and sheet finishing facilities, it expects a portion of operating inefficiencies to continue to affect performance in the third quarter.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -18.46% due to these changes.

VGM Scores

Currently, U.S. Steel has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.

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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