U.S. Steel Corporation
U.S. Steel Corporation (X) released its 1Q18 earnings results yesterday. While the company’s earnings beat analysts’ estimates, its 2018 guidance seems to have spooked markets. Like Cleveland-Cliffs (CLF), U.S. Steel provides its annual EBITDA (earnings before interest, tax, depreciation, and amortization) guidance during its earnings calls. Nucor (NUE) and Steel Dynamics (STLD) typically provide their earnings guidance 15 days before a quarter ends.
Last year, during its 1Q17 earnings call, U.S. Steel reduced its 2017 EBITDA guidance by $200 million to $1.1 billion. This reduction was surprising, given that US flat rolled steel prices had increased since its 4Q16 earnings call.
Fast forward to its 4Q17 earnings call in 2018, and U.S. Steel raised its annual guidance by a minimum of $200 million amid higher steel prices. The company assumed spot HRC (hot rolled coil) prices of $695 per ton in its 2018 earnings guidance of $1.5 billion.
U.S. Steel highlighted its earnings’ sensitivity to steel prices during its 4Q17 earnings release, describing two scenarios. “The first scenario assumes that spot prices in the United States increase ten dollars per month for the remainder of the year, which would result in our 2018 EBITDA Outlook increasing to approximately $1.7 billion. The second scenario assumes that spot prices in the United States decrease ten dollars per month for the remainder of the year, which would result in our 2018 EBITDA Outlook decreasing to approximately $1.3 billion.”
Numbers don’t add up
Spot HRC prices (MT) have risen more than $150 per ton since U.S. Steel gave its previous guidance. The company might face questions on its guidance during its 1Q18 earnings call, as its numbers don’t seem to add up. U.S. Steel might also want to provide more details on the “continued operational volatility” it mentioned in its 1Q18 earnings release.
We’ll get more details today after the company’s earnings call. See our Basic Materials page for a post-release analysis of U.S. Steel’s earnings. Also, check out all the data we have added to our quote pages. Now you can get a valuation snapshot, earnings and revenue estimates, and historical data as well as dividend info. Take a look!