Earnings Preview: US Steel seen posting strong 1st quarter
NEW YORK—United States Steel Corp. reports earnings for the first quarter on Tuesday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Like other U.S. steelmakers, U.S. Steel is expected to benefit from a weak dollar and an increase in demand from emerging markets demand. Domestically, steel demand remains strong for oil and gas pipeline work, petroleum drilling, bridge replacement and highway construction.
These factors have sent steel prices dramatically higher during the first quarter. One industry price monitoring service, Purchasingdata.com, said the price of benchmark grade hot-rolled sheet in coil increased by 24 percent in the first quarter to $661 per ton.
During the quarter, United States Steel announced plans to invest $300 million into its Minnesota Ore Operations, increasing production of iron pellets.
BY THE NUMBERS: Analysts polled by Thomson Financial expect, on average, earnings per share of $1.82 on revenue of $5.09 billion.
ANALYST TAKE: Deutsche Bank-North America analyst David S. Martin named United States Steel his top pick in his "Steel in the Americas" sector.
"We believe the company is well positioned to benefit from rising steel prices, its integrated business model, cost reductions, and acquisition integration," he wrote in an April 7 analyst note. "In addition, (U.S. Steel) appears to have its 'act together' operationally which remains a primary concern for investors."
WHAT'S AHEAD: Steel prices are expected to keep rising. Purchasingdata.com forecasts a rise in hot-rolled coil steel of 29 percent to $850 per ton in the second quarter.
The company projects lower pension expenses in the second quarter but warns that volatility in net interest and other financial costs could increase.
STOCK PERFORMANCE: Shares rose 4.9 percent to $126.87 during the first quarter. The stock closed Friday at $152.48.
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