U.S. Steel Beats Q4 Earnings - Analyst Blog

United States Steel Corporation X recorded adjusted net income of $38 million or 27 cents per share in the fourth quarter of 2013 versus net loss of $59 million or 41 cents per share posted a year ago. Adjusted income excludes an after-tax non-cash restructuring and other charges of $302 million, or $2.09 per share and a tax benefit of $142 million, or 98 cents per share. The results exceeded the Zacks Consensus Estimate of a loss of 26 cents.

After including one-time items, net loss for the reported quarter was $122 million or 84 cents per share compared with net loss of $50 million or 35 cents per share recorded in the year-ago quarter.

For full-year 2013, net loss was $2,064 million or $14.27 per share compared with net loss of $124 million or 86 cents per share. The net loss in 2013 include a favorable tax-related item as well as goodwill impairment and restructuring charges.

Revenues for the fourth quarter fell roughly 4.9% year over year to $4,269 million, missing the Zacks Consensus Estimate of $4,331 million. For the full year, revenues declined 9.9% to $17,424 million.

Segment Highlights

U.S. Steel's Flat-rolled segment reported a profit of $87 million in the fourth quarter compared with a profit of $11 million in the year-ago quarter and $82 million in the third quarter of 2013. The sequential upside was due to increased average spot and market based contract prices. Average realized price of $752 per net ton was however at par with the third quarter due to higher percentage of hot rolled shipments.

The U.S. Steel Europe (USSE) segment recorded a profit of $12 million in the quarter, up from last year's profit of $7 million and a loss of $32 million in third-quarter 2013. The segment posted profit in the quarter due to higher shipments and reduced facility repairs and maintenance costs as a blast furnace outage was completed in the previous quarter. Average realized price of $692 per net ton declined 3.6% year over year and 3.1% sequentially.
 
U.S. Steel's Tubular segment profit was flat year over year but decreased 34.7% sequentially to $32 million. The sequential decline was mainly due to lower shipments and average realized prices as end users lowered drilling activity to operate within their 2013 capital budgets. Average realized price declined 7.1% year over year and 2.2% sequentially to $1,509 per net ton.

Profit for the Other Businesses segment rose 66.7% year over year and 7.1% sequentially to $15 million.

Financial Condition
 
U.S. Steel had cash and cash equivalents of $604 million as of Dec 31, 2013, up 6% from $570 million as of Dec 31, 2012. Long-term debt was $3,616 million as of Dec 31, 2013, down 8.1% from $3,936 million as of Dec 31, 2012.

Outlook

Moving ahead, results from the Flat-rolled segment are expected to increase in the first quarter of 2014 on the back of higher average realized prices and shipments and lower repairs and maintenance costs. The company also expects to have reduced idled facility costs after the shut down of the iron and steelmaking facilities at Hamilton Works.  U.S. Steel forecasts raw materials costs, primarily for purchased scrap, and energy costs to increase.

U.S. Steel expects the European segment to post first-quarter results that are comparable to the fourth quarter. Average realized prices are expected to increase compared with the fourth quarter but this is expected to be offset by an increase in raw materials costs, primarily iron ore, and other operating costs.

Results from the Tubular segment are expected to decrease as gains from lower operating costs and increased shipments will be more than offset by lower average realized prices and a rise in substrate costs. Shipments are expected to increase as drilling activity begins to improve.
U.S. Steel currently carries a short-term Zacks Rank #1 (Strong Buy).

Other players in the steel industry worth considering are Companhia Siderurgica Nacional SID, ArcelorMittal MT and AK Steel holding Corporation AKS. While Companhia Siderurgica Nacional and ArcelorMittal carry a Zacks Rank #1 (Strong Buy), AK Steel has a Zacks Rank #2 (Buy).