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United States Steel: Thoughts On Q1 Earnings

May 03, 2020 4:57 PM ETUnited States Steel Corporation (X)20 Comments
Leo Nelissen profile picture
Leo Nelissen


  • While beating estimates, United States Steel reported devastating quarterly results as COVID-19 hit the first quarter hard.
  • The company focused on idling facilities and raising liquidity for what is likely an extended period of weakness and uncertainty.
  • As I don't believe in a rapid V-shaped recovery, I am on the sidelines to buy cyclical exposure at lower prices.

This earnings season feels like a never-ending horror story. It's almost always the same: companies either beat or miss absolutely terrible expectations, report weakness across the board, and withdraw guidance after mentioning to raise as much liquidity as possible to withstand an economic force that's shaping up to be worse than the Great Financial Crisis. The Pittsburgh PA-based United States Steel Corporation (NYSE:X) reported much better earnings than expected while missing on sales. The company was hit by imploding economic growth as every segment saw significantly lower sales on top of falling steel prices. While management is unable to give full-year guidance, the focus has shifted to maintaining healthy liquidity levels and lower costs. While I was long going into the earnings call and sold before the stock went down again, I will be a buyer of more shares as soon as economic growth bottoms or as soon as the market gets serious hints that infrastructure stimulus is underway. I expect this will happen as soon as the market starts selling off again.

Source: United States Steel

Here's What Happened In Q1

Let's start by mentioning the good news first. US Steel reported earnings per share of -$0.73. While this is the fourth consecutive quarterly decline and third consecutive quarterly loss, it's well above estimates of -$0.84. Before I show you the quarterly details, keep in mind that earnings continue to perfectly follow economic momentum. In Q4 of 2018, economic leading indicators in the United States peaked, resulting in negative earnings growth in the second quarter of 2019 and beyond.

Source: Estimize

With this in mind, let's look at company-wide sales and segment performances. As I already briefly mentioned, weakness started all the way at the top as sales came in at $2.75 billion. This is down 21% compared to the prior-year quarter and below expectations

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!

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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