U.S. Steel Stock Rallies On Earnings Beat, As Industry Powers Up

United States Steel (X) topped fourth-quarter earnings and revenue estimates late Thursday. However, the company was the latest steel stock in recent weeks to see earnings drop compared to a year ago. U.S. Steel stock rallied Friday.

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U.S. Steel Stock: Earnings

Estimates: Analysts expected earnings to retreat 85% to 56 cents per share. Adjusted earnings were expected to be 54 cents per share in Q4. Wall Street forecast revenue also falling 28% to $4.03 billion. For the full year, analysts predicted EPS to drop 38% to $9.16 while sales were expected to edge up 2% to $20.78 billion.

Results: United States Steel reported earnings falling 76% to 87 cents per share. Sales dropped 23% to $4.34 billion. For the full year, revenue grew 4% to $21.06 billion. Earnings dropped 26% to $9.95 per share.

CEO David Burritt said the Q4 earnings beat owed to combined efforts of the company’s domestic steelmaking operations and its tubular steel segment, which is generally used in vehicles and industrial machines.

Burritt said U.S. Steel is “well-positioned for 2023” and that it returned approximately $900 million to shareholders in 2022.

The State Of The Steel Industry

Earnings from Pittsburgh-based U.S. Steel come amid rising expectations for steelmakers. Infrastructure spending, related to last year’s Inflation Reduction Act and other legislation, is pouring billions of dollars into steel-hungry projects.

But despite tariffs still protecting U.S.-made steel, steelmakers are still nursing pandemic-era wounds.  Nucor (NUE), on Jan. 26, topped earnings and revenue estimates, even as EPS dropped 36% and sales decreased 16%. This followed Steel Dynamics (STLD) beating Q4 views while also seeing earnings and revenue drop 24% and 9%, respectively.

Meanwhile, on Jan. 9, steel stock Commercial Metals Company (CMC) saw better-than-expected EPS and sales with earnings growing 38% to $2.24 per share in Q1 2023.

Cleveland-Cliffs (CLF) is due to report Q4 earnings on Feb. 14. Wall Street forecasts a loss of 22 cents per share, down from a profit of $1.69 per share a year ago. Revenue is forecast down 2% to $5.24 billion.

United States Steel Stock

U.S. Steel stock advanced 6% early before ending Friday market trade up 2.8%. Shares had dropped 0.4% to 29.23 Thursday. The stock has rallied more than 61% since late September, including a 13.7% advance in January.

The stock is above the left-side midpoint in a 10-month consolidation. That means it could form a valid handle at any point.

In the third quarter, U.S. Steel sales and earnings declined, with revenue falling 13% to $5.2 billion while $1.95 earnings per share marked a 66% decline.

U.S. Steel stock ranks ninth among the steel stocks in the Steel-Producers industry group. The group has posted the fourth-strongest advance among industries over the past three months. It currently ranks No. 6 out of the 197 groups tracked by IBD.

The stock has an 73 Composite Rating out of 99. The stock has an 92 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement. The EPS rating is 21.

U.S. Steel Stock: Backstory

The Covid-19 pandemic mangled global supply chains in many industries, including steel. As much of the world slogged through the crisis, demand for steel crashed. Steel demand started to pick up toward the end of 2020.

In the first half of 2022, steel stocks came off strong quarterly performances, turning industry executives bullish on both product demand and the industry outlook. However, analysts assessed the market as oversupplied, suggesting very little pricing strength.

As a result, many steel stocks posted lackluster third-quarter financial reports, which led to a group sell-off.

U.S. Steel had a string of six quarterly losses between Q3 2019-Q4 2020. Since then, the steel stock has put together seven straight quarterly profits.

In 2021, U.S. steel prices skyrocketed to all-time highs, moving above $1,900 per short ton in August 2021. Prices fell into a lull early in 2022. They then surged to around $1,500 per short ton of hot-rolled coil (HRC) in April after Russia invaded Ukraine. Before the pandemic, HRC prices ran near $500 per ton.

On Thursday, benchmark HRC steel futures rose around 1% to $795 per short ton. China’s steel rebar futures traded at about $600 per ton Thursday.

In 2022, U.S. Steel stock gained around 10% in what was an up and down year for the steel stock.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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