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U.S. Steel (X) Q4 Earnings Crush Estimates, Sales Miss

U.S. SteelX recorded net loss of $105 million or 61 cents per share in the fourth quarter of 2016, narrower than a net loss of $1.1 billion or $7.74 per share a year ago. The results in the reported quarter include unfavorable adjustments of $152 million.

Barring one-time items, earnings were 27 cents per share for the reported quarter that outstripped the Zacks Consensus Estimate of a penny per share.

Revenues rose roughly 3% year over year to $2,650 million in the fourth quarter, but trailed the Zacks Consensus Estimate of $2,666 million.

For full-year 2016, the company registered a net loss of $440 million or $2.81 per share, lower than a net loss of $1.6 billion or $11.24 per share a year ago. The results improved as the company gained from its efforts to improve its cost structure through its 'Carnegie Way' initiatives amid a challenging operating environment.

Sales for the full year slipped roughly 11% year over year to $10,261 million.

United States Steel Corporation Price, Consensus and EPS Surprise

United States Steel Corporation Price, Consensus and EPS Surprise | United States Steel Corporation Quote

Segment Highlights

U.S. Steel's Flat-Rolled segment recorded a profit of $65 million in the reported quarter against a loss of $88 million in the year-ago quarter. However, the results in the reported quarter declined on a sequential basis due to lower average realized prices, reduced shipments and higher outage spending.

The U.S. Steel Europe ("USSE") segment posted a profit of $63 million in the reported quarter, higher than $6 million recorded a year ago. The results, however, declined from third-quarter 2016 due to higher raw material costs, in particular, for coking coal and iron units.

U.S. Steel's Tubular segment registered a loss of $87 million in the quarter, wider than a loss of $64 million a year ago. Fourth-quarter results declined compared with the third quarter, mostly due to an unfavorable adjustment for obsolete inventory associated with the downturn in the energy markets.

Financials

U.S. Steel exited 2016 with cash and cash equivalents of $1,515 million, a twofold year-over-year increase. Long-term debt decreased 4% year over year to $2,981 million. The company generated operating cash flow of $727 million for 2016.

Outlook

U.S. Steel noted that it has entered 2017 with improved market conditions than what it had faced at the onset of 2016. However, market conditions still remain volatile. The company said that it will focus on improving its assets and operating performance and driving innovation that creates differentiated solutions for its customers.

If market conditions remain at their current levels, the company expects net earnings of around $535 million or $3.08 per share, and EBITDA of roughly $1.3 billion for 2017. The results for its Flat-Rolled, European and Tubular segments are anticipated to be higher than 2016.

U.S. Steel expects to be cash positive for 2017, mainly due to improved cash from operations. The company forecasts results for other businesses to be comparable year over year and also sees around $50 million of post-retirement benefit expense.

The company anticipates the market conditions to change, and as changes occur during 2017, its net earnings and adjusted EBITDA should change consistent with the pace and magnitude of changes in market conditions.

Price Performance

U.S. Steel has outperformed the Zacks categorized Steel-Producers industry over the past three months. The company's shares have gained around 83.9% over this period, compared with roughly 23% gain recorded by the industry.

Zacks Rank & Key Picks

U.S. Steel is a Zacks Rank #1 (Strong Buy) stock.

Other well-placed companies in the steel space include Steel Dynamics, Inc. STLD , Angang Steel Company Limited ANGGY and AK Steel Holding Corporation AKS .

Steel Dynamics has an expected long-term growth of 12% and sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

Angang Steel has an expected earnings growth of 8.6% for the current year and also carries a Zacks Rank #1.

AK Steel carries a Zacks Rank #2 (Buy) and has an expected long-term growth of 5%.

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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 Nasdaq, Inc.


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

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