1 May

Will U.S. Steel’s Q1 Earnings Reassure Investors?

WRITTEN BY Mohit Oberoi, CFA

U.S. Steel Corporation

U.S. Steel Corporation (X) saw a flurry of downgrades last month. Credit Suisse downgraded the stock from “neutral” to “underperform.” The company saw a double downgrade from Bank of America Merrill Lynch. The brokerage downgraded U.S. Steel Corporation from “buy” to “underperform” and lowered its target price from $31 to $18. On April 17, Cowen lowered U.S. Steel Corporation’s target price from $21 to $17.

Will U.S. Steel’s Q1 Earnings Reassure Investors?

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Earnings call

U.S. Steel Corporation’s first-quarter earnings call would likely provide an opportunity for its management to reassure investors and analysts. In the first-quarter earnings call, in response to the question “why are domestic mills charging at or below landed import prices if demand is so good and imports are down,” Nucor’s (NUE) CEO John Ferriola put the blame partially on new mill startup. Ferriola said, “When you start up a mill or restart a mill, there’s issues with some quality and deliveries and so forth that force you to be a little bit lower priced to gain the market share you’re looking to gain.”

U.S. Steel Corporation restarted two blast furnaces last year. Analysts have also raised concerns about U.S. Steel Corporation’s cash burn and weak competitive position. Last year, the Clairton Works fire weighed on investors’ sentiments.

Guidance

During the first-quarter earnings call, U.S. Steel Corporation might present its perspective on the above-mentioned topics to soothe investors’ nerves. Unlike the previous earnings call, U.S. Steel Corporation wouldn’t provide annual earnings guidance this time. The company has changed its guidance methodology and would only give quarterly guidance. AK Steel (AKS) has moved to annual guidance from this year. Read AK Steel and U.S. Steel: A Tale of Two Guidance Methodologies to learn more.

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