What to Watch in U.S. Steel Corporation’s 1Q17 Earnings



1Q17 earnings

As we noted previously, U.S. Steel Corporation (X) saw several upgrades after its 4Q16 earnings. While the company’s 4Q16 earnings beat certainly helped it win over analysts, its 2017 guidance seems to be the key driver behind analysts’ upgrades. During its 4Q16 earnings call, U.S. Steel Corporation said that it expects to post EBITDA (earnings before interest, tax, depreciation, and amortization) of $1.3 billion in 2017. U.S Steel Corporation’s guidance assumes constant commodity prices (NUE) (AKS), which holds true for steel and raw material prices. U.S. Steel Corporation’s fiscal 2017 EBITDA guidance could be the most crucial metric to follow in the company’s 1Q17 earnings call.

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Annual guidance

U.S. Steel Corporation saw significant changes in its rating over the last few quarters as it updated its annual EBITDA guidance. For instance, the stock saw sharp upwards price action after its 2Q16 earnings following its higher 2016 guidance. However, falling steel prices prompted the company to cut its annual guidance during the 3Q16 earnings call. Not surprisingly, U.S. Steel Corporation saw negative price action after its 3Q16 earnings.

What to expect?

In our view, U.S. Steel Corporation could raise its annual EBITDA during the 1Q17 earnings call. A combination of higher steel prices (XME) and lower spot coal prices bodes well for U.S. Steel Corporation’s profitability. The company’s 2017 EBITDA guidance could be higher compared to current consensus estimates. Although U.S. Steel Corporation’s guidance is based on prevailing commodity prices, analysts’ estimates take average commodity prices into account. The stock could see some upgrades on higher EBITDA guidance.

In the next part of this series, we’ll see how analysts rate ArcelorMittal (MT).


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