360° Coverage : U.S. Steel Expected To Report Flat Year-Over-Year Results...

2 Updates

U.S. Steel Expected To Report Flat Year-Over-Year Results Despite Higher Prices

Jan 28 2014, 7:21am CST | by

U.S. Steel will announce its fourth quarter earnings on Tuesday, January 28. We expect the company to report no significant growth in profits, if any. This is because while the pricing environment...

Filed under: news

 
 
 

35 weeks ago

U.S. Steel Expected To Report Flat Year-Over-Year Results Despite Higher Prices

Jan 28 2014, 7:21am CST | by


U.S. Steel will announce its fourth quarter earnings on Tuesday, January 28. We expect the company to report no significant growth in profits, if any. This is because while the pricing environment for steel was slightly better in the fourth quarter, we expect lower shipments year-over-year. The results for the first nine months in 2013 showed a 5% drop for flat-rolled steel and a 9% for tubular steel sales by volume, and we expect the company to have fared no better in the fourth quarter on this front./>

While the U.S. Steel stock price surged in late December and early January, it has subsequently undergone a significant correction. We think that the rally was driven by a surge of positive sentiment due to lower expected raw material prices, the expected cost reductions from Project Carnegie and expectations of strong economic growth in the U.S. going forward. However, in our view, the structural factors in the industry remain unchanged and challenges remain the same as before. Therefore, there seem to be no material positive triggers on the horizon at the moment.

See Full Analysis of U.S. Steel Here

Challenges In Tubular Steel Continue

The rising tide of imports into the U.S. has prompted U.S. Steel and other major producers to ask for duties on imported oil and tubular country goods which are supposedly being sold at unfairly low prices. This has prompted the U.S. Commerce Department to launch an investigation into alleged unfair trade practices being followed by exporting countries. Imports of OCTG steel from the nine countries under investigation (India, Vietnam, Philippines, Thailand, Taiwan, Turkey, Saudi Arabia and Ukraine) totaled $1.8 billion in 2012. The quantity has more than doubled since 2010, owing to rising U.S. oil and natural gas production which is increasing demand for OCTG steel. Given the high price realizations from OCTG grades of steel and the fact that they account for 15% of its revenues, U.S. Steel has a significant stake in ensuring a favorable outcome from the investigation. However, the probe is likely to take time to complete and the company’s tubular steel business is likely to continue facing challenging business conditions in the meantime.

Irrespective of the present status of the case, we expect the performance of the tubular steel segment to have been negatively impacted in the fourth quarter. In addition to imports, other factors such as increased market supply by domestic producers, announcements by other companies of further capacity addition and the ability of oil and gas companies to function better with lower number of rigs will contribute negatively to this division’s performance. In the third quarter, these factors had forced U.S. Steel to record an impairment of $0.8 billion at its Texas plant which produces tubular steel. Also, oil and gas companies typically spend less in the fourth quarter as they attempt to remain within budgeted annual capital expenditure.

Impact Of Other Factors

U.S. Steel has been placing a lot of faith in its Project Carnegie initiative to make its operations more efficient and reduce costs across the board. The savings are expected to be worth $75 million this year which we think won’t impact profitability significantly this year. The gains may get compounded over the next few years but until then, we don’t see this as a material factor impacting profitability.

China’s steel production capacity has reached about 800 million tonnes this year which is negative for prices. While the government is now belatedly attempting to cut down this capacity by shutting down polluting units and the availability of credit has somewhat tightened, we will have to wait and watch how the situation unfolds over the next few quarters.

There are other positives going for the company in the forthcoming quarters. These include lower coke prices, self-reliance for iron ore and replacement of coke by natural gas at some plants. However, these won’t confer an advantage over rivals if iron ore prices in global markets decline as is being expected in anticipation of a supply glut and if the permission to export liquefied natural gas on a large scale leads to higher gas prices. Even if natural gas prices remain low, any short-term advantage is likely to be negated by rivals adapting their operations to use gas instead of coke.

In the earnings conference call, we would like to hear a status update in the ongoing case against steel imports, the management’s strategy to deal with a likely shift to aluminum by automotive manufacturers and the expected cost savings from Project Carnegie next year and beyond.

We have a price estimate of $19 for U.S. Steel, which represents a 25% downside to the current market price.

See More at Trefis | View Interactive S&P Capital IQ Analyses (Powered by Trefis)

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

Source: Forbes Business

 
Update
2

4 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce of ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

4 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and MH17" hits h ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Serious about taking forward civil nuclear deal: Modi
Washington, Sep 30 (IANS) Prime Minister Narendra Modi said Tuesday that he has conveyed to US President Barack Obama that India is "serious about taking forward" the civil nuclear deal with the US and resolving issues.
 
 
Sought access for Indian companies to American markets: Modi
Washington, Sep 30 (IANS) Prime Minister Narendra Modi said Tuesday that he has urged US President Barack Obama to take steps that would help Indian service companies get access to the US economy.
 
 
Unique 'signature' found in ageing brain
London, Sep 30 (IANS) In a discovery that may lead to treatments that can slow or reverse cognitive decline in the elderly, researchers have found evidence of a unique "signature" in the ageing brain.
 
 
Why drinking makes a smile more contagious among men
New York, Sep 30 (IANS) Alcohol induces a sort of "social bravery" among men, disrupting processes that would normally prevent them from responding to another person's smile, says an interesting study.
 
 
 

Latest from the Network

Hong Kong students threaten to occupy government offices
Hong Kong, Sep 30 (IANS/EFE) Student demonstrators have decided to step up their street protests and are planning to eventually take over and occupy government offices, leaders of the Hong Kong Federation of Students...
Read more on Politics Balla
 
US slaps sanctions on Pakistan-based terror groups
Washington, Sep 30 (IANS) The US Tuesday targeted two terrorist groups based in Pakistan by slapping sanctions on their leader and financial supporters. The Department of Treasury branded Fazl-ur Rehman Khalil, the...
Read more on Politics Balla
 
Elton John performed at Neil Patrick Harris' wedding
Neil Patrick Harris has revealed Sir Elton John gave a surprise performance at his wedding. The 'Gone Girl' star tied the knot with his long-term partner David Burtka at a castle near Perugia in Italy on September 6 and...
Read more on Celebrity Balla
 
Molly Sims pregnant again
Molly Sims is pregnant with her second child. The model-and-actress has announced she is expecting another baby with her husband, film producer Scott Stuber, and she can't wait for their two-year-old son Brooks to...
Read more on Celebrity Balla
 
Sadie Frost says Kate Moss oozes 'sex'
Sadie Frost thinks Kate Moss ''radiates sex''. The 49-year-old actress-and-producer has been friends with the supermodel for decades and says her aura has an permanently erotic element to it. Speaking to the new issue...
Read more on Celebrity Balla
 
Hamas wants Islamic state on all Palestinian lands: Official
Gaza, Sep 30 (IANS) A senior Hamas official announced Tuesday that his movement still believes in establishing an Islamic state on all the lands of Palestine. Mahmoud al-Zahar, the Hamas strongman, said in a ceremony...
Read more on Politics Balla
 
Asian Games: Indian men and women in semifinals
Incheon, Sep 30 (IANS) The Indian men and women's kabaddi teams made it to the semifinals of the 17th Asian Games after topping their respective groups here Tuesday. The men's team, record six time champions, brushed...
Read more on Sport Balla
 
Israeli settlers seize houses in east Jerusalem
Jerusalem, Sep 30 (IANS) Dozens of Jewish settlers, escorted by heavy police force, took over at least seven empty buildings in the Palestinian neighbourhood of Silwan in east Jerusalem Tuesday. The buildings are...
Read more on Politics Balla
 
Indian men paddlers in Asiad pre-quarters
Incheon, Sep 30 (IANS) Indian men paddlers advanced to the doubles pre-quarterfinals after winning their respective matches of the 17th Asian Games at the Suwon Gymnasium here Tuesday. First up, the pair of Achanta...
Read more on Sport Balla
 
IS releases third video of British hostage
Beirut, Sep 30 (IANS/EFE) The Islamic State (IS) Sunni radical organisation has published a third video of British journalist and hostage John Cantlie in which he criticizes US President President Barack Obama's...
Read more on Politics Balla