U.S. News

U.S. Steel Earnings Jump, But Weak Forecast Hurts Shares


U.S. Steel posted higher first-quarter profit, but its shares sank as it forecast results in the current quarter below Wall Street estimates.

First-quarter net earnings were $273 million, or $2.30 a share, up from $256 million, or $2.04 a share, a year earlier.

Excluding a one-time charge for early debt retirement, earnings were $2.32 a share, far above analysts' average forecast of $1.88 as compiled by Reuters Estimates.

The Pittsburgh-based steelmaker forecast second-quarter results in line with the first quarter -- but that would be well below the average Wall Street estimate of $2.62 a share.

"We expect continued solid operating results for our three reportable segments, with overall (second-quarter) results in line with the first quarter," Chairman and Chief Executive John Surma said in a statement.

"The guidance for the second quarter was not very favorable," said Charles Bradford, analyst with Bradford Research/Soleil.

Analysts had been expecting a stronger second quarter for steel makers after a weak first quarter, he said.

"We believe that this will be viewed as a disappointment," said independent steel industry analyst Michelle Applebaum.

The U.S. Steel forecast, as well as comments from peers such as Nucor last week about soft margins, indicate any rebound will take longer than expected.

European Business Strong

The company's U.S. Steel Europe business showed the biggest gains during the first quarter, with income from operations rising to $206 million from $125 million a year earlier.

Operating income from flat-rolled products fell to $75 million from $127 million. Shipments declined even as average prices rose to $650 per ton from $616.

Tubular products saw a drop in average prices to $1,435 a ton from $1,506 a year earlier as shipments fell to 247,000 tons from 319,000.

In January, U.S. Steel, which had cut domestic capacity because of high customer inventories and foreign imports, announced it was ramping up production as demand and prices improved, and Surma said the first quarter looked brighter as customer inventories had leveled off and appeared to be declining.

Also on Tuesday, AK Steel Holdingreported first-quarter profit jumped tenfold to $62.7 million on higher steel prices and shipments.