U.S Steel (NYSE:X) is poised to report its Q3 2022 results on October 28. We expect adjusted earnings to come in at about $1.95 per share, slightly ahead of consensus estimates although this would mark a significant decline from 2021 when earnings stood at almost $5.36 per share. We project that revenue will stand at about $4.97 billion, down by about 16% versus the last year although it would be roughly in line with consensus estimates. So what are some of the key trends that are likely to drive results? See our interactive dashboard analysis on U.S. Steel Earnings Preview for more details on how U.S. Steel’s revenues and earnings are likely to trend for the quarter.
US Steel’s financial performance was solid over the first half of the year, with revenue and operating profits growing by 32% and 62% year-over-year respectively, driven by a surge in steel prices following the Russian invasion of Ukraine. However, the market appears to have cooled considerably in Q3 amid economic headwinds and continued interest rate hikes by the U.S. Federal Reserve and other major central banks. U.S. Steel for its part has indicated that its flat-rolled volumes could slow, amid weaker demand from automotive and appliance customers who continue to face supply chain headwinds. While average pricing for flat products has also softened over the quarter, hurting revenue from the spot and monthly contracts, this should be offset to an extent by fixed-price long-term contracts. The company’s mini-mill segment will see a more pronounced hit to revenue due to its higher exposure to spot contracts. Overall margins are also likely to take a hit on a sequential and year-over-year basis due to supply chain issues and surging energy costs.
However, we remain marginally positive on U.S. Steel stock with a $24 price estimate, which is about 10% ahead of the current market price. The company has cut its debt, with net debt standing at under $1 billion at the end of the last quarter, which is very manageable even in the current rising interest rate environment. U.S. Steel has also less exposure to the European market (it derived about 20% of its sales from Europe, versus over 50% for ArcelorMittal) and this could give it an edge over rivals as energy prices surge amid uncertainty about gas supplies. Moreover, even if there is a recession in the U.S., indicators do not point to a very deep decline this time around, with household savings rising post the pandemic, and banks also remaining well-capitalized. See our analysis of US Steel Valuation: Is X Stock Expensive Or Cheap? for a closer look at what’s driving our price estimate.
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 Month-to-date and year-to-date as of 10/24/2022
 Cumulative total returns since the end of 2016
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