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United States Steel Corp. (NYSE:X) reported its preliminary financial results for the quarter ended 2013-06-30. We analyzed the company based on these preliminary results versus the following peer-set: POSCO (NYSE:PKX), ArcelorMittal SA (NY Reg Sh) (NYSE:MT), Nucor Corp. (NYSE:NUE), Companhia Siderurgica Nacional ADS (NYSE:SID), Steel Dynamics Inc. (NASDAQ:STLD), Worthington Industries Inc. (NYSE:WOR), Mechel OAO ADS (NYSE:MTL), AK Steel Holding Corp. (NYSE:AKS) and Timken Co. (NYSE:TKR). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Quarterly (USD million)

2013-06-30

2013-03-31

2012-12-31

2012-09-30

2012-06-30

Revenues

4,429.0

4,595.0

4,487.0

4,652.0

5,017.0

Revenue Growth %

(3.6)

2.4

(3.5)

(7.3)

(3.0)

Net Income

(78.0)

(73.0)

(50.0)

44.0

101.0

Net Income Growth %

N/A

N/A

(213.6)

(56.4)

N/A

Net Margin %

(1.8)

(1.6)

(1.1)

0.9

2.0

ROE % (Annualized)

(9.0)

(8.4)

(5.5)

4.8

11.6

ROA % (Annualized)

(2.1)

(1.9)

(1.3)

1.1

2.6

Valuation Drivers

United States Steel Corp. trades at a lower Price/Book multiple (0.8) than its peer median (2.0). The market expects it to grow faster than the median of its chosen peers (PE of 474.5 compared to peer median of 20.8) and to improve its current ROE of -4.5% which is below its peer median of 5.2%. Thus, the market seems to expect a turnaround in the company's current performance.

The company's profit margins are below peer median (currently -0.9% vs. peer median of 0.6%) while its asset efficiency is about median (asset turns of 1.2x compared to peer median of 1.1x). United States Steel Corp.'s net margin continues to trend downward but is still within one standard deviation above its five-year average net margin of -1.5%.

Growth & Investment Strategy

While the company's revenues growth has been around the peer median in recent years (20.5% vs. 18.4% respectively for the past three years), the market gives its shares a higher than peer median PE ratio of 474.5. The market seems to see faster growth ahead.

United States Steel Corp.'s annualized rate of change in capital of -2.6% over the past three years is less than its peer median of 5.9%. This below median investment level has also generated a less than peer median return on capital of -2.8% averaged over the same three years. This outcome suggests that the company has invested capital relatively poorly and now may be in maintenance mode.

Earnings Quality

United States Steel Corp. reported relatively weak net income margins for the last twelve months (-0.9% vs. peer median of 0.6%). However, the company booked a level of accruals that is around peer median (4.7% vs. peer median of 5.1%) for the same period, suggesting that its reported net income is supported by a reasonable level of accruals.

Its accruals over the last twelve months are positive suggesting a buildup of reserves. However, this level of accruals is also around the peer median and suggests the company is recording a proper level of reserves compared to its peers.

Trend Charts

Quarterly revenue trend for US Steel Annual revenue trend for US Steel Quarterly net margin trend for US Steel Annual net margin trend for US Steel Quarterly accruals trend for US Steel Annual accruals trend for US Steel

United States Steel Corp.: Free and complete Fundamental Analysis Report (email registration required)

Company Profile

United States Steel Corp. is an integrated steel producer of flat-rolled and tubular products with production operations in North America and Europe. It operates through the three reportable operating segments: Flat-Rolled Products, U.S. Steel Europe and Tubular Products. United States Steel was founded in 1901 by Andrew Carnegie, John Pierpont Morgan, Charles Michael Schwab and Elbert Henry Gary and is headquartered in Pittsburgh, PA.

Disclaimer

Source: Earnings Analysis For United States Steel Corp.