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

 
 
 

37 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

7 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 ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

7 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 ...
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

260 people still under Ebola watch in US
Washington, Oct 21 (IANS/EFE) Health authorities are keeping more than 260 people under observation for the Ebola virus in Texas and Ohio, after family and friends of Thomas Eric Duncan, the Liberian who contracted Ebola in his country and died in the US, concluded their quarantine period without developing symptoms.
 
 
Australian nurse discharged after Ebola scare
Sydney, Oct 21 (IANS) An Australian nurse, who was admitted to a hospital in Cairns for symptoms of the Ebola virus, is set to return to lead normal life after three weeks in isolation, Brisbane Time reported.
 
 
Toddlers may show signs of autism at 18 months
New York, Oct 21 (IANS) Younger siblings of children with Autism Spectrum Disorder (ASD) may show signs of the disorder by the time they are just 18 months, said a study.
 
 
China has nearly 60,000 centenarians
Beijing, Oct 21 (IANS) A total of 58,789 centenarians are living in China, and the oldest is 128 years old, the Gerontological Society of China revealed Tuesday.
 
 
 

Latest from the Network

1,074 new dengue cases in Chinese province
Beijing, Oct 18 (IANS) China's Guangdong province has reported 1,047 new cases of dengue fever, health authorities said Saturday. Six people have already died in Guangdong -- five in Guangzhou and one in adjacent...
Read more on Business Balla
 
Blake Lively 'always' wanted to be mum
Blake Lively has ''always'' wanted to be a mother. The 27-year-old actress is expecting her first child with husband Ryan Reynolds and she admits she's been dreaming of this moment since she was a youngster. Speaking...
Read more on Celebrity Balla
 
Kris Jenner 'torn apart' by Bruce's new relationship
Kris Jenner feels ''torn apart and angry'' that Bruce Jenner is dating her former assistant. The 58-year-old matriarch split from the 64-year-old Olympic gold medalist last October following 22-years of marriage but is...
Read more on Celebrity Balla
 
Cheryl Fernandez-Versini won't move to France
Cheryl Fernandez-Versini doesn't want to move to her husband's home country of France. The 'X Factor' judge, 31, who comes from Newcastle, is adamant she won't be relocating any time soon to suit her new spouse Jean-...
Read more on Celebrity Balla
 
Lance Bass sets wedding date
Lance Bass has set a date for his wedding. The former *NSYNC singer and his partner Michael Turchin, who have been dating for two-and-a-half years, are to tie the knot on December 20, 2014, a representative for the...
Read more on Celebrity Balla
 
Nepal avalanche toll reaches 39
Kathmandu, Oct 18 (IANS) At least 39 climbers died while hiking on a key Nepali route after it was hit by a major snowstorm and avalanches earlier this week, BBC reported Saturday citing officials. Over 350 stranded...
Read more on Politics Balla
 
Jake Gyllenhaal says society is complicit in 'nightcrawling'
Jake Gyllenhaal says almost everybody in society ought to relate to his new movie 'Nightcrawlers'. The eagerly-awaited film concerns those people who monitor police scanners and then race to crime scenes to film eye-...
Read more on Movie Balla
 
India eves look for first win in AFC U-16 qualifiers
Dhaka, Oct 18 (IANS) India will hope to register their first win of the 2015 Asian Football Confederation (AFC) Under-16 Women's Championship qualifiers when they take on hosts Bangladesh in a crucial encounter at the...
Read more on Sport Balla
 
Moyes mulling return to management
London, Oct 18 (IANS) Former Manchester United manager David Moyes said that he is ready to revive his managerial career six months after being sacked by the 'Red Devils'. "I am ready to return. I have enjoyed the...
Read more on Sport Balla
 
Ebola fears loom over Ghana hosting AFCON
Accra (Ghana), Oct 18 (IANS) The Ghana Medical Association (GMA) cautioned the government Saturday against hosting the 2015 African Cup of Nations (AFCON), despite a request by the Confederation of African Football (...
Read more on Sport Balla