U.S. Steel expects lower earnings in fourth quarter



U.S. Steel’s 4Q14 outlook

We have discussed the 3Q14 results of U.S. Steel Corporation (X). In this part, we will analyze its 4Q14 outlook. Apparently, U.S. Steel (X) management expects its 4Q14 earnings to be lower compared to 3Q14. Let’s see what factors will drive U.S. Steel’s fourth-quarter earnings.


U.S. Steel’s (X) fourth-quarter outlook for lower earning in the fourth quarter is based on the following:

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  • Flat-rolled profits are expected to be significantly lower over 3Q14. U.S. Steel (X) management expects operating income of its flat-rolled segment to drop significantly in the fourth quarter. As discussed previously, this segment generated operating income of $347 million in the third quarter. One of the reasons for the drop in fourth-quarter earnings is planned maintenance at some of its plants. The company expects to incur costs around $150 million on these planned outages. The average selling prices are also expected to be less compared to the third quarter. This can be seen in the above chart.
  • The company’s tubular segment is expected to post slightly better profits in 4Q14. U.S. Steel (X) expects shipments to come down in the fourth quarter. The average selling prices, however, are expected to increase. As discussed previously, the average selling prices increased after the United States imposed an anti-dumping duty on imports of these goods.
  • Operating profits are expected to rise in Europe.  U.S. Steel (X) expects slight improvement in its European operations in the fourth quarter, largely due to higher shipments and lower maintenance costs.

Higher maintenance costs have been an area of concern for U.S. Steel. In the next part, we will analyze some actions taken by U.S. Steel (X) management to address this issue. Please be aware that the steel industry can also be assessed through AK Steel (AKS), Nucor (NUE), ArcelorMittal (MT), and State Street Global Advisors (or SPDR) Standard & Poors (or S&P) metals and mining exchange-traded fund (or ETF) (XME).


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