What to Watch for in U.S. Steel’s 4Q16 Earnings Call



U.S. Steel’s 4Q16 earnings call

Previously, we looked at analysts’ estimates for U.S. Steel Corporation’s (X) 4Q16 earnings. In this part, we’ll analyze the key updates that markets are waiting for in the company’s 4Q16 earnings call.

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EBITDA guidance

While Nucor (NUE) and Steel Dynamics (STLD) provide quarterly earnings guidance, U.S. Steel and ArcelorMittal (MT) give annual EBITDA (earnings before interest, tax, depreciation, and amortization) guidance. During U.S. Steel’s 4Q16 earnings call, markets will eagerly await its fiscal 2017 guidance.

Coal contracts

U.S. Steel produces steel in blast furnaces and uses coking coal and iron ore (CLF) as a raw material. Following its 3Q16 earnings release, U.S. Steel indicated that some of the company’s coal contracts “involve both supply and price certainty that extend beyond the current year.” It basically means that these contracts might not be impacted by the big spike in coal prices. However, the company didn’t provide information on what percentage of its annual coal contracts are under these fixed contracts. During U.S. Steel’s 4Q16 earnings call, markets would expect more updates from the company regarding its 2017 coal contracts. Notably, coking coal prices saw significant volatility last year—as you can see in the above graph.

Capital expenditure

During its 3Q16 call, U.S. Steel talked about the need to “revitalize” its facilities, which would lead to higher capital expenditure in the coming quarters. It would be crucial to watch U.S. Steel’s 2017 capital expenditure guidance. Along with higher cash flows, higher maintenance activity could have a negative impact on U.S. Steel’s shipments in 2017.

Don’t forget to visit Market Realist’s Steel page for U.S. Steel’s 4Q16 post-earnings analysis. Meanwhile, you can read How Will the Steel Industry Fare in 2017 to explore the steel industry’s 2017 outlook.


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