U.S. Steel’s Q2 2017 Earnings Preview: Favorable Business Conditions To Drive Earnings Growth

July 24th, 2017 by Trefis Team
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U.S. Steel will release its Q2 2017 earnings results on July 25 and conduct a conference call with analysts the next day. [1] We expect the company to report a significant year-over-year improvement in its earnings, driven by superior demand and pricing conditions for steel in the U.S. and Europe.

The business prospects of steel producers in both the U.S. and Europe have been negatively impacted by competition from unfairly traded steel imports over the past few years. However, the imposition of punitive tariffs on unfairly traded steels by regulatory authorities in both the U.S. and Europe over the past year has helped lower the competition from these steels to the respective domestic steel industries, resulting in an increase in steel prices. In addition, improving economic conditions in these geographies have boosted demand conditions, which have supported the increase in steel prices.

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While the improved demand and pricing conditions are expected to drive earnings improvement for U.S. Steel, the company’s earnings growth is likely to be tempered by its asset revitalization program – an overhaul of its U.S. Flat-rolled facilities in order to improve their reliability and operational performance. The U.S. Flat-rolled operations reported a 4% year-over-year decline in shipments in Q1 as a result of the disruption in production caused by the asset revitalization program, with the initiative expected to negatively impact shipments over the rest of the year as well. [2]

Thus, though market conditions for steelmakers are quite favorable at present, the loss in shipments resulting from U.S. Steel’s asset revitalization process represents a missed opportunity for the company. We will be keenly looking out for more updates pertaining to the progress made by the company under this initiative in the Q2 earnings conference call.

Have more questions about U.S. Steel? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for U.S. Steel

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Notes:
  1. U. S. Steel Conference Call Available On Company Website, U.S. Steel Website [↩]
  2. U.S. Steel’s Q1 2017 Earnings Release, SEC [↩]