U.S. Steel (X) Huge Q2 Earnings Beat - Analyst Blog

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U.S. Steel 's ( X ) losses narrowed in second-quarter 2014 as it gained from its cost improvement actions under the Carnegie Way initiative and improved pricing that offset weather-related headwinds.

Net loss, as reported, for the quarter was $18 million or 12 cents per share compared with a net loss of $78 million or 54 cents per share recorded a year ago.

Barring one-time items including $46 million in litigation-related charges, the Pittsburgh-based steel maker posted earnings of 17 cents per share in the quarter. Analysts polled by Zacks expected a loss of 33 cents on an average for the quarter.

Revenues inched down roughly 0.7% year over year to $4,400 million. It came ahead of the Zacks Consensus Estimate of $4,204 million.

Shipments for the reported quarter were roughly 5 million, down 4.1% from around 5.2 million recorded a year ago, affected by bad weather.

U.S. Steel's shares shot up as much as 9.5% in extended trading yesterday, reflecting the forecast-topping results.


United States Steel Corp - Earnings Surprise | FindTheBest



Segment Highlights

U.S. Steel's Flat-rolled segment reported a profit of $30 million in the second quarter compared with a loss of $51 million in the year-ago quarter and an income $85 million in the sequentially prior quarter. The sequential decline resulted from bad weather-related logistic bottlenecks that affected shipments and increased repairs and maintenance costs. Average realized prices increased on both year over year and sequential comparison basis.  

The U.S. Steel Europe (USSE) segment recorded a profit of $38 million in the quarter, up from last year's profit of $10 million and $32 million posted in the previous quarter. The segment benefited from lower iron ore costs in the quarter. Average selling prices were essentially flat year over year while declining modestly from the previous quarter.

U.S. Steel's Tubular segment's profit was $47 million in the reported quarter, up from $24 million in the previous quarter and $45 million in the year-ago quarter. The sequential increase was mainly due higher shipments and lower raw material costs.

Profit for the Other Businesses segment was $17 million, down from $43 million posted a year-ago while up from $13 million in the previous quarter.

Financial Condition

U.S. Steel ended the quarter with cash and cash equivalents of $1,471 million, up around 92% year over year. Long-term debt was $3,605 million, essentially flat year over year. The company repaid the balance $322 million of its 2014 senior convertible notes during the quarter.

Outlook

Moving ahead, U.S. Steel sees a considerable rise in income from operations in the third quarter of 2014 on a sequential basis as it expects to return to normal operating levels.

In the Flat rolled segment, U.S. Steel envisions results to improve sequentially in the third quarter on higher shipments. Operations are expected to return to normal levels while pricing is expected to remain in line with the second quarter. The absence of operational and weather-related challenges is expected to provide a roughly $150 million favorable impact in the quarter.

U.S. Steel expects results for its European segment to decrease sequentially in the quarter as maintenance outages coupled with impact of the European holiday season are expected to lead to lower shipments and increased repairs and maintenance costs. Average realized prices are expected to be at par with the second quarter while raw material costs have been forecast to decline in the third quarter.

Tubular results are forecast to increase modestly compared to the second quarter. Shipments are projected to be lower due to idling of the McKeesport and Bellville plants. U.S. Steel expects average realized prices to increase in the third quarter.

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

Other steel companies having favorable Zacks Rank are Grupo Simec S.A.B. de C.V. ( SIM ), Olympic Steel Inc. ( ZEUS ) and ThyssenKrupp AG ( TYEKF ). While Grupo Simec holds a Zacks Rank #1 (Strong Buy), Olympic Steel and ThyssenKrupp retain a Zacks Rank #2 (Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: X , SIM , ZEUS , TYEKF

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