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Why US Steel's Q3 Report Might Include A Guidance Cut

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Why US Steel's Q3 Report Might Include A Guidance Cut
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Investors are encouraged to sell their stakes in United States Steel Corporation (NYSE: X), according to analysts at Axiom. The firm's Gordon Johnson maintains a Sell rating on US Steel's stock and expects the company to revise its guidance to the downside in conjunction with Tuesday's earnings report.

U.S. Steel is expected to slash its 2017 EBITDA guidance by around 25 percent, according to Johnson's proprietary EBITDA guidance tracker analysis. U.S. Steel previously guided its 2017 EBITDA to be $1.1 billion in 2017, but now a revision to $828 million is likely.

The analysis takes into account the change in hot-rolled coil steel spot prices as of U.S. Steel's current and prior quarter earnings and the change in the company's EBITDA guidance as of the current and prior quarter earnings among other factors.

"While, admittedly, this approach looks at just one facet of X's business, given, in general, Tubular- and European steel mkt trends tend to move in tandem w/ the US mkt, we find our approach useful," the analyst wrote (see his track record here).

Also, the steel market likely experienced headwinds in the auto sector as evidence by General Motors Company (NYSE: GM)'s third-quarter loss of $3 billion, which marks its first loss since fourth-quarter 2009.

Finally, the financial model approach when using a 90-percent confidence interval over five quarters dating back to second-quarter 2016, has predicted the company's EBITDA within 82 percent of the guided number, Johnson said.

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Nov 2018CitigroupMaintainsBuyBuy
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Oct 2018Seaport GlobalInitiates Coverage OnBuy

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