U.S. Steel Q4 2017 Earnings Preview: Improved Operational Efficiencies to Drive Earnings

-11.73%
Downside
40.78
Market
36.00
Trefis
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United States Steel

U.S. Steel (NYSE: X) will announce its Q4 2017 and full year 2017 earnings results on January 31 and conduct a conference call with analysts the next day. The graph below summarizes our expectations from the upcoming results. These have been created using our new interactive platform. The company is expected to deliver modest growth in revenue and a boastful growth in earnings, driven mainly by improved operational efficiency.

The flat-rolled division of U.S. Steel, which accounts for greater than 70% of the company’s revenue is expected to remain subdued this quarter largely because of the production disruption experienced due to the ongoing asset revitalization program. Although China’s steel production curtailments have provided some respite to steel prices in Q4, we anticipate prices to remain at a similar level as that in Q3 due to an offsetting impact of an increase in the share of steel imports in the U.S. economy.

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On the revenue side, a major highlight of this quarter should be the U.S. Tubular division, which has been experiencing a revival throughout the year due to a recovery in the prices of oil. Organization of the Petroleum Exporting Countries’ (OPEC) decision to extend its output cut throughout 2018 would continue to support global oil prices and lead to increased oil drilling activities in the U.S which would consequently aid the price and shipment volume of the Tubular segment of U.S. Steel.

The bottom line for Q4 will majorly be driven by the resultant impact of the company’s cost reduction initiatives (Carnegie Way initiative) and the expected operational benefits from the ongoing asset revitalization program. The Carnegie Way, U.S. Steel’s ongoing cost reduction, and productivity enhancement initiative is likely to prop up the company’s bottom line by approximately $440 million in 2017.

We have $38 price estimate for U.S. Steel which is 6% below the market.

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 in 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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