UPDATE: US Steel 3Q Manages To Beat But Outlook Remains Murky
October 27 2009 - 11:12AM
Dow Jones News
U.S. Steel Corp. (X) saw its third-quarter results improve
sequentially and top expectations, but it swung to a loss from the
prior year as concerns about weak demand remain hanging over the
industry.
While shipments increased "significantly from the very low
levels of the second quarter," according to Chairman and Chief
Executive John P. Surma, the company predicted the current quarter
would improve overall, but have similar results to the third,
signaling a plateauing of the growth for now.
"We remain cautious in our outlook for end user demand as
customer order rates in Flat-rolled and U.S. Steel Europe have
decreased from the third quarter," the company said in a
release.
North America's largest steelmaker by output added it
anticipates a fourth-quarter loss on continued low operating rates.
Analysts polled by Thomson Reuters recently expected a loss of 97
cents a share.
The company's stock fell 6% to $38.16 in recent trading, its
lowest point since the end of July.
Longbow Research analyst Luke Folta said the stock decline
ignores solid management decisions and comes along with a broader
drop in the steel market.
"The number one takeaway, in my opinion... is that they have
been pretty clear to say they are going to adjust production for
levels that are more in line with customer demand," Folta said.
"With fourth-quarter shipments expected to be lower, there were
some concerns."
Both Schnitzer Steel Industries Inc. (SCHN) and AK Steel Holding
Corp. (AKS) also topped analysts' expectations but slumped in
Tuesday trading on concerns that the growth came only as a result
of customers replacing inventories.
Schnitzer fell 5.7% to $48.25 in recent trading after saying it
expects volumes to fall in the first quarter. AK Steel slumped 5.4%
to $17.77.
For its third quarter, U.S. Steel swung to a loss of $303
million, or $2.11 a share, from a year-earlier profit of $919
million, or $7.79 a share. Net sales tumbled 61% to $2.82 billion.
Analysts expected a loss of $2.87 a share on revenue of $2.72
billion.
Shipments fell 35% from a year ago but jumped 41% from the prior
quarter. The average selling price of flat-rolled products was down
33% from a year ago and 11% from the second quarter.
-By David Benoit, Dow Jones Newswires; 212-416-2458;
david.benoit@dowjones.com
(Mike Barris contributed to this article.)