Key Updates Investors Should Watch for in U.S. Steel’s 3Q16 Call



U.S. Steel’s 3Q16 call

On its 2Q16 earnings conference call, U.S. Steel (X) gave guidance of $850 million in adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for 2016, assuming the continuation of the prevailing market scenario at the time. It’s important to note that while U.S. Steel and ArcelorMittal (MT) give annual earnings guidance, Nucor (NUE) and Steel Dynamics (STLD) give quarterly guidance.

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Steel prices have fallen

However, steel market conditions have deteriorated since U.S. Steel reported its 2Q16 earnings. Spot HRC (hot roll coil) prices have lost ~$130 per short ton and are currently below the $500 per short ton mark. Though AK Steel (AKS) has announced a hike in flat steel prices on October 24, the overall market mood is somber given the seasonally weak steel demand in the fourth quarter.

Markets will await the new EBITDA guidance from U.S. Steel during the company’s 3Q16 earnings call. Notably, after U.S. Steel’s 2Q16 earnings call, many analysts had raised U.S. Steel’s earnings estimates on better-than-expected guidance.

Contract pricing

Markets will also watch for an update on coking coal contracts in U.S Steel’s 3Q16 earnings call. U.S. Steel produces steel in blast furnaces and uses coking coal as a raw material. Now, spot seaborne coking coal prices have been on fire this year. They’ve almost tripled since the beginning of the year. Markets will await updates from U.S. Steel’s management on the ongoing pricing negotiations with its coal suppliers.

In the next and final article, we’ll see how analysts are rating U.S. Steel ahead of its 3Q16 earnings.


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