What Can Investors Expect in 4Q17?
Looking at U.S. Steel Corporation’s guidance, its 4Q17 shipments could be flat compared to its shipments in 3Q17.
Graphite electrode prices have risen this year due to capacity curtailments in China. Cathode availability has also impacted steelmakers.
Looking at ArcelorMittal’s guidance, its 4Q17 steel shipments could be higher compared to 4Q16.
While US steel producers were reasonably optimistic about the US steel demand outlook, they lamented higher imports.
The Trump Administration ordered a probe under Section 232 of the Trade Expansion Act of 1962 to see if steel imports threaten US national security.
So far, the US steel industry is having a tepid year. Most US-based steel producers are trading with year-to-date losses.
Among the key macroeconomic indicators published by the Fed, capacity utilization in US industries helps investors forecast business cycle changes.
Last week, there wasn’t major analyst action for US-based steel companies. Several analysts changed their ratings on steel stocks after their 3Q17 earnings.
Steel prices are a key driver of steel companies’ earnings. The prices are crucial for steel investors to follow the trend in spot steel prices.
While China’s demand indicators showed signs of moderation, there isn’t a visible slowdown in the country’s steel production.
Last week was mixed for steel stocks—they followed different trajectories. With gains of 6.6%, AK Steel (AKS) was the biggest gainer.
Freeport’s balance sheet could look strong next year if copper prices hold near the current price levels.
U.S. Steel (X) has received a “buy” rating from 51% of its analysts, while 13% analyst recommend a “sell.”
U.S. Steel (X) is trading at a forward EV-to-EBITDA multiple of 4.5x—the lowest forward EV-to-EBITDA among its major peers.
U.S. Steel posted FCF of $128 million in 3Q17, compared with $304 million in 2Q17 and $213 million in 3Q16. Nucor reported FCF of $313 million in 3Q17.
Analysts expect U.S. Steel (X) to generate adjusted EBITDA of $317 million in 4Q17, which would be slightly higher than the company’s guidance.
U.S. Steel (X) expects to post adjusted EBITDA of ~$1.08 billion in fiscal 2017. The company expects its 4Q17 EBITDA to fall sequentially.
U.S. Steel (X) posted adjusted EBITDA of $342 million in 3Q17. The company posted EBITDA of $362 million in 2Q17 and $272 million in 3Q16.
Average selling price is a key metric that steel investors watch closely, and geographical exposure and product portfolios are among the key drivers.
Given its guidance, U.S. Steel’s 4Q17 shipments could be flat compared with shipments in 3Q17.