U.S. Steel (X) Up 4.7% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for United States Steel (X). Shares have added about 4.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is U.S. Steel due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

U.S. Steel's Earnings Beat Estimates in Q1, Revenues Miss

U.S. Steel slipped to a net loss of $391 million or $2.30 per share in first-quarter 2020 from net earnings of $54 million or 31 cents per share reported in the year-ago quarter.

Barring one-time items, adjusted loss per share was 73 cents against adjusted earnings per share of 47 cents in the prior-year quarter. The figure was narrower than the Zacks Consensus Estimate of a loss of 80 cents.

Revenues fell 21.5% year over year to $2,748 million in the first quarter. Moreover, the top line missed the Zacks Consensus Estimate of $2,776.1 million.

Segment Highlights

Flat-Rolled: The Flat-Rolled segment recorded a loss of $35 million in the first quarter against net earnings of $95 million in the year-ago quarter.

Steel shipments in the segment fell 7.9% year over year to 2,509,000 tons and average realized price per ton in the unit was $711, down 10.9% year over year.

U.S. Steel Europe: The segment posted a loss of $14 million against a net profit of $29 million in the year-ago quarter. Shipments in the segment dropped 24.7% year over year to 801,000 tons and average realized price per ton for the unit was $611, down 8.8% year over year.

Tubular: The Tubular segments posted a loss of $48 million against a net profit of $10 million in the year-ago quarter.

Steel shipments declined 9.7% year over year to 187,000 tons. Average realized price per ton for the unit was $1,283, down 17.2% year over year.

Financials

U.S. Steel ended the quarter with cash and cash equivalents of $1,350 million, up 144% year over year. Long-term debt rose 98.5% year over year to $4,616 million.

Outlook

The company adjusted its footprint, strengthened its balance sheet and aggressively cut costs as the impacts of the coronavirus pandemic and changes in the oil and gas markets became evident. Notably, the actions helped it surpass its first-quarter outlook.   

The company granted Stelco an option to purchase a 25% stake in its Minntac iron ore mining operations for the purchase price of $600 million. Notably, the move showcases the continued execution of its strategy and delivers $100 million of incremental cash to the balance sheet in 2020. Also, the transaction gives U.S. Steel a path to record an additional $500 million of capital to support the continued execution of its strategy.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -14.29% due to these changes.

VGM Scores

At this time, U.S. Steel has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, U.S. Steel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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