What Are The Key Sources Of Revenue For U.S. Steel?

U.S. Steel (NYSE: X) is an integrated steel producer of flat-rolled and tubular products with a capacity of 22 million tons and major production operations in North America and Europe. The company also operates four iron ore mining sites and is engaged in rail and barge transport services. U.S. Steel posted strong results for the first two quarters of 2018, beating revenue estimates largely because of a favorable market environment for steel at its key markets. Yet, the company’s stock price has declined about 10% in the last couple of months due to a weak outlook for its adjusted-EBITDA for the third quarter.

Below, we discuss the key sources of revenue for U.S. Steel. We expect the company to generate $14.01 billion in revenue in 2018.

We have a price estimate of $33 per share for the company, which is higher than its current market price. View our interactive dashboard – Key Revenue Sources Of U.S. Steel – and modify the key drivers to visualize the impact on the company’s revenue and valuation.

• U.S. Flat-Rolled Revenue (67%) – Flat-Rolled products refer to the steel sheets and plates that are made by rolling processes. The various products in this division include hot rolled sheets, cold rolled sheets, coated sheets, semi-finished bars and plates, and tin mill products. The division has an annual production capacity of 17 million tons and is a major growth driver for the company’s performance year-to-date in 2018. With the better average price per ton of flat-rolled shipments due to imposed tariffs, we expect 9.4 billion in revenues from this division in 2018.
• European Tubular and Flat-Rolled Products Revenue (24%) – This division includes steel sheets and plates as well as tubular items such as pipes that are made by rolling processes and are sold in the European market. We expect improved demand for steel from the strengthening of the US economy, which is expected to support pricing growth for this division. However, the persistent overcapacity of steel production is bound to put pressure on the realized average price per ton. According to our estimates, we expect 4.7 million shipments from this division with an average realized price of steel shipment in this region to be $714 per ton, translating into $3.37 billion in revenues in 2018.
• U.S. Tubular Products Revenue (9%) – Tubular products refer to the steel pipes made using flat-rolled steel. A strong domestic demand has facilitated revenue growth in this division. The notable volume and price growth for the segment was supported by an increased oil drilling activity in the US as crude oil prices continue to remain strong. The sustained recovery in oil prices is likely to support growth in the average price per ton. With an average price of $1,564 per ton, we expect total revenues from this segment to be $1.23 billion in 2018.

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