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U.S. Steel: Is The Post Earnings Sell-Off Justified?

Aug. 03, 2018 2:21 PM ETUnited States Steel Corporation (X)27 Comments
Leo Nelissen profile picture
Leo Nelissen


  • U.S. Steel beat earnings and raised its full-year EBITDA guidance.
  • The company was able to grow total shipments.
  • I expect the stock to remain in its uptrend with support from economic growth and the company's asset revitalization program.

United States Steel (NYSE:X) just revealed a very strong second quarter. Not only did the company beat earnings estimates they also raised guidance and revealed further progress when it comes to the current asset revitalization program. I expect the stock price to continue its uptrend as long as there is support from strong economic sentiment.

Source: United States Steel

A Solid Earnings Beat In Q2

U.S. Steel reported EPS of $1.46. This is 36% higher on a year-on-year basis and the 5th consecutive earnings beat. It is also the 9th consecutive quarter with a positive growth rate since the second quarter of 2016. This shows that the company has been able to do quite well since the economic bottom of the first quarter of 2016 even though the company is operating in one of the most cyclical segments of the steel industry: flat-rolled steel.

Source: Estimize

Higher Shipments & Better Pricing

The first thing I look for when I research steel companies is the growth rate of shipments. Shipments exclude the impact of pricing and show the demand of steel products very well. In other words, it displays a company's ability to do business in a certain economic environment, in this case, an environment of above-average growth.

That being said, U.S. Steel did grow shipments in (almost) all categories. Flat-rolled steel saw a 3.5% shipments increase while tubular added 11.7%. U.S. Steel Europe, on the other hand, was unchanged (-0.09%). Total shipments increased 2.8%.

Moreover, every segment but U.S. Steel Europe benefited from both higher shipments and better pricing whereas U.S. Steel Europe's revenue increase was solely based on better pricing. Both flat-rolled and U.S. Steel Europe did see a higher adjusted EBITDA result in the second quarter while tubular saw a decline. This decline was due to very high input inflation which caused the price

This article was written by

Leo Nelissen profile picture
Welcome to my Seeking Alpha profile!I'm a buy-side financial markets analyst specializing in dividend opportunities, with a keen focus on major economic developments related to supply chains, infrastructure, and commodities. My articles provide insightful analysis and actionable investment ideas, with a particular emphasis on dividend growth opportunities. I aim to keep you informed of the latest macroeconomic trends and significant market developments through engaging content. Feel free to reach out to me via DMs or find me on Twitter (@Growth_Value_) for more insights.Thank you for visiting my profile!

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