Why Is U.S. Steel (X) Down 15.2% Since Last Earnings Report?

A month has gone by since the last earnings report for United States Steel (X). Shares have lost about 15.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is U.S. Steel due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

U.S. Steel Tops Earnings and Revenue Estimates in Q1

U.S. Steel saw its profits jump in the first quarter of 2019, driven by strong earnings in its Flat-Rolled segment. The company logged net earnings of $54 million or 31 cents per share for the quarter, up three-fold from $18 million or 10 cents in the year-ago quarter.

Barring one-time items, adjusted earnings came in at 47 cents a share, up from 32 cents a year ago. It trounced the Zacks Consensus Estimate of 17 cents.

Revenues rose roughly 11% year over year to $3,499 million in the quarter, and surpassed the Zacks Consensus Estimate of $3,245.1 million.

Segment Highlights

Flat-Rolled: Profit in the Flat-Rolled segment was $95 million in the quarter, a nearly three-fold surge from $33 million in the year-ago quarter.

Total steel shipments in the segment rose roughly 8% year over year to 2,725,000 tons and average realized price per ton in the unit was $798, up roughly 8%.

U.S. Steel Europe: The segment delivered a profit of $29 million, down 74% from $110 million a year ago. Total shipments in the segment went down around 6% year over year to 1,064,000 tons and average realized price per ton for the unit was $670, down roughly 5% year over year.

Tubular: U.S. Steel’s Tubular segment posted a profit $10 million, compared with a loss of $27 million in the year-ago quarter.

Total steel shipments for the segment was up around 16% year over year to 207,000 tons. Average realized price per ton for the unit was $1,549, up roughly 12%.

Financials

U.S. Steel ended the quarter with cash and cash equivalents of $676 million, down around 51% year over year. Long-term debt fell roughly 10% year over year to $2,326 million.

The company returned $51 million to shareholders during the quarter including share repurchases worth $42 million.
 
Outlook

U.S. Steel noted that its progress continued in the first quarter as reflected by the strong results.  The company expects adjusted EBITDA for the second quarter to be similar to the first quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -46.32% due to these changes.

VGM Scores

At this time, U.S. Steel has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise U.S. Steel has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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