U.S. Steel's (X) Earnings, Revenues Trail Estimates In Q4

United States Steel Corporation (NYSE:X) saw higher profits in the fourth quarter of 2018, buoyed by a significant increase in earnings in its Flat-Rolled segment and higher steel prices.

The Pittsburgh-based steel maker logged net earnings of $592 million or $3.34 per share for the quarter, up nearly four-fold from $159 million or 90 cents in the year-ago quarter.

Barring one-time items, adjusted earnings came in at $1.82 a share, up from 76 cents a year ago. However, it missed the Zacks Consensus Estimate of $1.88.

Revenues climbed roughly 18% year over year to $3,691 million in the quarter, but fell short of the Zacks Consensus Estimate of $3,752.3 million.

FY18 Results

For 2018, net earnings were $1,115 million or $6.25 per share, up nearly three-fold from $387 million or $2.19 per share recorded in 2017. Higher steel prices contributed to the surge in profits.

Net sales for the year went up 16% year over year to $14,178 million.

Segment Highlights

Flat-Rolled: Profit in the Flat-Rolled segment was $328 million in the fourth quarter, a four-fold surge from $82 million in the year-ago quarter.

Total steel shipments in the segment rose roughly 12% year over year to 2,733,000 tons and average realized price per ton in the unit was $823, up roughly 15%.

U.S. Steel Europe: The USSE segment delivered a profit of $62 million, down 45% from $112 million a year ago. Total shipments in the segment went down 14% year over year to 1,073,000 tons and average realized price per ton for the unit was $686, up roughly 8% year over year.

Tubular: U.S. Steel’s Tubular segment posted a loss $3 million, narrower than a loss of $6 million in the year-ago quarter.

Total steel shipments for the segment was up around 21% year over year to 216,000 tons. Average realized price per ton for the unit was $1,488, up roughly 5%.

Financials

U.S. Steel ended 2018 with cash and cash equivalents of $1 billion, down around 36% year over year. Long-term debt fell roughly 14% year over year to $2,316 million.

The company returned more than $110 million to shareholders in 2018 including share repurchases worth $75 million.

Outlook

Moving ahead, U.S. Steel expects adjusted EBITDA for the first quarter of 2019 at roughly $225 million. This excludes the expected impacts of fire at its Clairton coke making plant.

The company envisions EBITDA in the Flat-rolled unit for the first quarter to improve on a year-over-year basis, mainly due to higher average realized selling prices, partly offset by increased raw materials costs.

For the U.S. Steel Europe segment, the company expects first-quarter EBITDA to be lower on a year-over-year basis factoring in lower volumes, higher raw materials costs and unfavorable currency impact.

For the Tubular unit, U.S. Steel sees EBITDA to improve year over year in the first quarter, mainly due to higher average realized selling prices and higher volumes, partly offset by increased steel substrate costs.

Price Performance

Shares of U.S. Steel have lost 40.6% over a year, underperforming the industry’s 26.8% decline.

Zacks Rank and Stocks to Consider

U.S. Steel currently carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks worth considering in the basic materials space include Ingevity Corporation (NYSE:NGVT) , Quaker Chemical Corporation (NYSE:KWR) and Israel Chemicals Ltd. (NYSE:ICL) .

Ingevity has an expected earnings growth rate of 21.5% for the current year and carries a Zacks Rank #1 (Strong Buy). Its shares have gained 28% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Quaker Chemical has an expected earnings growth rate of 21.1% for the current year and carries a Zacks Rank #2 (Buy). Its shares have gained 30% in the past year.

Israel Chemicals has an expected earnings growth rate of 5.4% for the current year and carries a Zacks Rank #2. The company’s shares have rallied 39% over the past year.

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