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U.S. Steel Posts Positive Cash Flow in 2Q15 despite Loss

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Aug. 12 2015, Updated 11:05 a.m. ET

U.S. Steel Corporation’s 2Q15 cash flow

In the previous part of this series, we learned that U.S. Steel Corporation (X) has managed to reduce its cash conversion cycle. Now, we’ll look at U.S. Steel’s cash flow in 2Q15.

At any enterprise, cash flow comes from operating, investing, or financing. Raising cash through the issue of debt comes under financing activities. On the other hand, cash flow from the disposal or purchase of fixed assets falls under investing activities.

Of the three forms of cash flow, operating cash flow is the most important for a company. Operating cash flow is a key metric for investors in companies like ArcelorMittal (MT) and Gerdau (GGB).

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Operating cash flow

Operating cash flow is generated by a company’s core operations. In the last two quarters, U.S. Steel has reined in its working capital and posted a positive operating cash flow despite also posting a loss. You can see the trend in U.S. Steel’s operating cash flow in the previous chart.

Currently, U.S. Steel forms 4.6% of the SPDR S&P Metals and Mining ETF (XME) and 0.18% of the iShares Core S&P Mid-Cap ETF (IJH)

Earnings are the key driver of operating cash flow

From an investor’s perspective, it’s important to know that there’s a limit beyond which a company can’t cut its working capital. Over the long term, earnings are the key driver of a company’s operating cash flow.

U.S. Steel’s positive operating cash flow in 2Q15 might not be sustained in the coming quarters unless the company posts an operating profit. We’ll look at U.S. Steel’s guidance for 2015 profitability in the next part of our series.

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