Strong Quarter or Not, U.S. Steel Hunkers Down

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It was a good news/not-so-good-news quarter for U.S. Steel (NYSE: X  ) . On the one hand, the company's profit increased more than threefold, but on the other hand, its outlook for the fourth quarter and beyond was less than inspiring.

For the quarter, the company reported net income of $919 million, or $7.79 a share, versus $269 million, or $2.27 per share, for the same quarter last year. In addition, EPS for the most recent quarter was reduced by $0.67 by union-related employee signing bonuses, along with environmental remediation charges. Backing out those one-time items, the company's bottom-line results for the latest quarter came to $8.79. Consensus expectations had been for EPS to come in at $7.09, excluding the special items.

The company's flat-rolled operation yielded income of $835 million, up from $170 million in the third quarter of 2007. The driver was a nearly 200% increase in per-ton prices for the product, which is used in a variety of applications, including appliances and vehicle exteriors.

In the tubular goods sector -- which has primarily oilfield applications -- income jumped to $420 million from $74 million as a result of higher prices. At the same time, U.S. Steel's European operation saw its earnings slide as raw materials costs increased and shipments were reduced.

U.S. Steel's primary competitor, Luxembourg-based Arcelor Mittal (NYSE: MT  ) , will report next week, with forecasters expecting a near-doubling of that company's EPS. Nevertheless, a progressively more stagnant global economy and sliding commodities prices have taken their toll on the share prices of such big mining and metals companies as BHP Billiton (NYSE: BHP  ) and Rio Tinto (NYSE: RTP  ) , along with aluminum manufacturer Alcoa (NYSE: AA  ) , and copper, gold, and molybdenum producer Freeport-McMoRan (NYSE: FCX  ) .

Despite the company's strong quarter, U.S. Steel CEO John Surma was quite cautionary on his call, noting that the sharp drop in the market toward the end of the third quarter was "unlike any we have seen." Further, given that same drop-off and the lack of forward visibility, the World Steel Association decided against producing its annual world forecast last month.

As such, with the global steel picture being as murky and unpredictable as it appears, especially to those who should know, I'd urge my Foolish friends to find other uses for their investment shekels until that picture begins to brighten.

Motley Fool CAPS players have awarded U.S. Steel three stars, out of a possible five. What's your take on the company?

For related Foolishness:

Fool contributor David Lee Smith does own shares in U.S. Steel, but not in any of the other companies mentioned. He does welcome your questions of comments. The Fool has a well-forged disclosure policy.

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