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United States Steel: 1Q17 Was Terrible, but Could 2Q17 Be Better?

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Dec. 4 2020, Updated 10:50 a.m. ET

Selling spree for United States Steel

United States Steel (X) witnessed a selling spree after it released its 1Q17 earnings. Not only did the company miss its 1Q17 earnings estimate and post a surprise loss, but it also slashed its 2017 guidance. To make things worse, the company expects a higher cash outflow over the next three to four years under its asset revitalization program. As we approach the end of 2Q17, market attention has now shifted to United States Steel’s 2Q17 earnings. Now let’s see what analysts are projecting for those earnings.

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2Q17 consensus estimate

According to the consensus estimate compiled by Thomson Reuters, analysts expect United States Steel to post revenues of $2.98 billion in 2Q17. It posted revenues of $2.72 billion in 1Q17 and $2.58 billion in 2Q16. Analysts expect the company’s 2Q17 revenues to rise on a sequential as well as yearly basis.

We should remember that for steel companies such as ArcelorMittal (MT) and AK Steel (AKS), revenue is basically a function of average steel selling prices and shipments. United States Steel expects its 2017 US flat-rolled steel shipments to be similar to last year since its maintenance program limits its ability to offer steel in the spot market.

Average selling prices

Looking at the trend in spot steel prices (XME) (NUE), United States Steel’s 2Q17 average selling prices (or ASP) should be higher than the corresponding quarter last year. However, the company’s 2Q17 ASP could fall on a sequential basis. US spot steel prices have shown a weakness in 2Q17, which would reflect in steelmakers’ 2Q17 ASPs.

In the next part, we’ll see what analysts are projecting for United States Steel’s 2Q17 profitability.

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