Earnings Preview: US Steel - Analyst Blog
30 Gennaio 2012 - 4:20PM
Zacks
United States Steel Corporation (X) is
scheduled to report its fourth quarter and full-year 2011 results
before the market opens on Tuesday, January 31.
The Zacks Consensus Estimate for the quarter is a loss of 82
cents per share, representing a year-over-year increase of
54.89%.
With respect to earnings surprises, the company has beaten the
Zacks Consensus Estimate in two of the trailing four quarters. This
is reflected in the average earnings surprise of negative 20.76%,
with positive surprises in two quarters and a negative surprise in
both the first quarter of 2011 and the fourth quarter of 2010.
Third-Quarter Synopsis
US Steel reported third-quarter 2011 adjusted net income of
$118 million or 72 cents per share, exceeding the Zacks Consensus
Estimate of 55 cents per share.
The net income excluded $96 million or 57 cents per share of net
foreign currency losses, primarily related to the accounting
remeasurement of the inter-company loans. In addition to this, net
income came in at $22 million, or 15 cents per share versus net
loss of $51 million or 35 cents per share.
Revenues in the quarter improved 13% year over year to $5.1
billion from $4.5 billion a year ago, which was in line with the
Zacks Consensus Estimate of $5.1 billion
Company’s Outlook
U.S. Steel expects flat-rolled results to reflect an operating
loss, reflecting lower average realized prices on index-based
contracts and spot market business. In addition to the idled
facility carrying costs, the company expects to incur approximately
$30 million in costs related to the ratification of the Hamilton
Works labor agreement and associated facility restart costs.
Shipments are also expected to decline driven by cautious
purchasing patterns due to the uncertain economic outlook and
increasing domestic supply.
United Steel expects European segment results to be below the
third quarter level. Shipments and average realized prices are
expected to decline as market demand softens in response to the
uncertain economic conditions in Europe, particularly Southern
Europe.
Average realized prices for the Tubular segment are expected to
be comparable to the third quarter and shipments are expected to be
slightly lower as distributors actively control their inventory
levels during the year-end, particularly for non-oil country
tubular goods (OCTG) products.
Agreement of Estimate Revisions
In the past 30 days, two analysts made downward revisions for
the fourth quarter and fiscal 2011. Meanwhile, two analysts made
upward revision in the last 30 days for the fourth quarter of 2011
while one analyst made an upward revision for fiscal 2011.
In the last seven days, none of the analysts made any downward
movements for the fourth quarter while one analyst made a downward
revision for fiscal 2011. Two analysts made an upward revision for
the fourth quarter in the last 7 days while 1 made it for fiscal
2011.
Magnitude of Estimate
Revisions
In the last 30 days, the Zacks Consensus Estimate has improved
marginally from a loss of 83 cents to a loss of 82 cents for fourth
quarter and from break-even to 1 cent per share for fiscal
2011.
Over the last 90-day period, the Zacks Consensus Estimate
declined form a loss of 71 cents to a loss of 82 cents per share
for the fourth quarter of 2011 and from a profit of 23 cents to 1
cent per share for fiscal 2011.
Our Viewpoint
We believe that US Steel should see sequential declines in
earnings due to a decrease in steel demand and pricing earlier in
the fourth quarter, bumping up against an environment of elevated
raw material costs. Furthermore, US Steel faces stiff competition
from Arcelor Mittal (MT) and
POSCO (PKX).
We however feel that the company’s Tubular segment will have
strong results as the demand for oil country tubular goods remains
strong. Also US Steel is the only fully integrated domestic tubular
producer and the only domestic producer offering a full range of
products and services.
We further believe that the company’s announcement of the sale
of its Serbian unit is a positive step as the unit was bearing
losses for the company and was running well below its annual
capacity of 2.4 million tons for the past five years.
In view of the above stated reasons, the company retains a Zacks
#3 Rank on its shares, indicating a short-term (1 to 3 months) Hold
rating and we have recommended the shares of the company as Neutral
for the long term (more than 6 months).
ARCELOR MITTAL (MT): Free Stock Analysis Report
POSCO-ADR (PKX): Free Stock Analysis Report
UTD STATES STL (X): Free Stock Analysis Report
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