Commodities & Metals

US Steel Gets Burned by Updated Guidance

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United States Steel Corp. (NYSE: X) shares dropped sharply on Thursday after the firm cut the guidance for its third quarter. Looking at the chart, it’s not surprising that this stock is headed even lower after falling nearly 32% in 2019 alone prior to this move.

The company said that it expects third-quarter 2019 adjusted EBITDA to be roughly $115 million, which excludes about $53 million of estimated third-quarter impacts from the December 24, 2018, fire at its Clairton coke making facility and estimated restructuring charges.

Ultimately, U.S. Steel expects a third-quarter 2019 adjusted diluted loss per share to be approximately $0.35. The consensus estimates are calling for a net loss of $0.07 per share and $3.17 billion in revenue for this quarter.

However, the story seems to get worse from due to deteriorating market conditions domestically and globally. According to U.S. Steel:

The positive flat-rolled steel market indicators experienced earlier this summer have softened after a brief recovery in steel selling prices. The impact of falling steel prices through the second quarter, combined with the impact of a larger than expected drop in scrap prices on market sentiment, is expected to negatively impact Flat-rolled earnings in the second half of the year. As a result, our current assessment of the Flat-rolled segment suggests two blast furnaces will remain idled through at least the end of the year…

In Europe, market conditions have continued to deteriorate, as the dislocation between steel selling prices and raw material costs continues to result in significant margin compression.  Based on current market conditions and the continued high level of steel imports into Europe, we do not expect to restart the currently idled blast furnace this year.

Separately, the firm noted that it will also continue to execute its labor productivity strategy at U. S. Steel Europe, which includes a headcount reduction of 2,500 by the end of 2021. To date, management has eliminated more or less 1,800 positions.

U.S. Steel shares traded down about 13.5% to $10.77 on Thursday, in a 52-week range of $10.16 to $30.91. The consensus price target is $13.50.

Other steel stocks pulled back early Thursday too, notably ArcelorMittal (NYSE: MT) 3.7% to $15.50, AK Steel Holding Corp. (NYSE: AKS) by 2.4% to $2.46 and Nucor Corp. (NYSE: NUE) by 1.2% to $52.25.

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