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Questions Remain For U.S. Steel, Guidance Cuts Deeper Than Initially Understood

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United States Steel Corporation (NYSE: X) investors are reeling following a disappointing first quarter earnings release that saw management cut 2017 EBITDA guidance by at least $200 million. Shares experienced their biggest decline since the company went public 26 years ago.

Analysts believe the guidance cut could ultimately be much larger than initially expected. Deutsche Bank's Jorge Beristain lowered his rating from Buy to Hold and lowered his price target from $45 to $30.

Deutsche Bank cut its 2017-2019E EBITDA forecast by about 18 percent on average and adjusted EPS by 52 percent.

“[W]e were hopeful that today’s conf. call would clarify 1Q17/guide, but responses to Q&A proved lacking. With management credibility diminished we see better relative options available to express view on US steel industry recovery,” Deutsche Bank said in a note.

Analysts remain particularly concerned about the company’s cash burn, with management’s decision to accelerate its Asset Revitalization Plan (ARP) which has seen muted volume benefits.  

“While the move is aimed at improving LT profitability, we believe, could result in short term volatility in performance akin to 1Q17 and higher cash burn,” Deutsche Bank said.

Shares of U.S. Steel Corporation were down another 1.3 percent Thursday afternoon.

Related Links:

U.S. Steel: Q1 Was Bad, But Things May Only Get Worse From Here

U.S. Steel Plummets 25% After Q1 Miss

Latest Ratings for X

DateFirmActionFromTo
Dec 2019Initiates Coverage OnBuy
Nov 2019MaintainsSell
Nov 2019MaintainsBuy

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Posted-In: Deutsche Bank United States Steel CorporationAnalyst Color Downgrades Price Target Analyst Ratings

 

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