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Could U.S. Steel Beat Earnings Estimates in 1Q16?

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Earnings expectations

According to consensus estimates compiled by Bloomberg, analysts expect U.S. Steel Corporation (X) to post a loss per share of $1.24 in 1Q16. In contrast, U.S. Steel posted adjusted losses per share of $0.23 and $0.07 in 4Q15 and 1Q15, respectively. Notably, while U.S. Steel and AK Steel (AKS) were in the red last year, Nucor (NUE) and Steel Dynamics (STLD) managed to remain profitable.

The graph above shows the trend in U.S. Steel’s actual versus estimated earnings per share. U.S. Steel managed to beat consensus earnings estimates in just one quarter last year. Last year, falling steel prices and weakness in the tubular market took a toll on the company’s earnings—a much bigger toll than what analysts were expecting.

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Earnings estimates

Investors in metal and mining companies (XME) should also follow the EBITDA (earnings before interest, tax, depreciation, and amortization) estimates and results. Analysts expect U.S. Steel to post a negative EBITDA of $34 million in 1Q16. In 4Q15, U.S. Steel posted a negative adjusted EBITDA of $13 million.

U.S. Steel could surprise on the upside with its 1Q16 earnings. However, a note of caution: U.S. Steel saw negative price action after its 4Q15 earnings release despite posting better-than-expected earnings. In 4Q15, U.S. Steel posted an adjusted loss per share of $0.23, which beat consensus estimates of a loss of $0.87 per share.

The sharp negative price action after U.S. Steel’s 4Q15 earnings release was mainly due to the dismal outlook echoed by the company’s management. In the next part of this series, we’ll explore why investors should watch U.S. Steel’s 2016 EBITDA guidance in its 1Q16 earnings release.

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