Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Can U.S. Steel Catch Up to ArcelorMittal and Nucor?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

U.S. Steel (NYSE: X  ) will release its quarterly report on Tuesday, and investors have hoped that the worst could be over for the steel industry. Yet even as rivals Nucor (NYSE: NUE  ) and ArcelorMittal (NYSE: MT  ) have seen some signs of relative strength, U.S. Steel recently had some bad news that could force it to play catch-up to participate in a long-awaited steel recovery.

U.S. Steel is just one of the companies that have gotten hit hard by the fall in global construction and infrastructure activity, with slowdowns in growth among emerging-market countries playing an especially big role in the drop in steel demand. Yet a big gain in sales of cars and trucks, along with a potential end to the recession in Europe, could give U.S. Steel avenues for greater sales growth. Yet can U.S. Steel ever regain the importance it once had and overshadow global industry giant ArcelorMittal and mini-mill specialist Nucor? Let's take an early look at what's been happening with U.S. Steel over the past quarter and what we're likely to see in its report.

Stats on U.S. Steel

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$4.32 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Why is U.S. Steel losing money?
In recent months, analysts have gotten much less enthusiastic about U.S. Steel earnings, doubling their loss projections for the third quarter and slashing their 2014 estimates by almost a third. The stock, though, has ignored those concerns, with shares rising 25% since late July.

U.S. Steel's second-quarter results showed the struggles that the steel industry has seen lately. Revenue fell almost 12% from the year-ago quarter, and the company lost money for the second quarter in a row. Furthermore, the company gave mixed guidance for the third quarter, expecting better results for its flat-rolled and tubular segment but worse results for its European segment because of a scheduled blast-furnace outage.

One big problem that U.S. Steel and ArcelorMittal in particular have had to deal with is the rise of Chinese steel production. State-run Chinese steelmakers have produced huge amounts of metal even as China's growth in steel use has slackened, putting pressure on global prices and making it far more difficult for ArcelorMittal to earn sales from the emerging-market nation. Even recent decisions from the Chinese government to cut steel production haven't yet caused a big positive impact for foreign companies, and U.S. Steel needs renewed demand without corresponding supply increases to boost global pricing to see its results improve.

More recently, some signs of a steel turnaround have emerged. The World Steel Association predicted that consumption would expand 2.9% this year, with Brazil and the rest of South America leading the way with expected jumps of more than 6% for the continent. Unfortunately, U.S. Steel isn't in the best position to profit directly from greater Latin American demand, as it has little production capacity outside the U.S. and therefore has to rely on secondary impacts in pricing to push profits higher. Even domestically, it has to fight Nucor's strong local presence, and that's a tough assignment given Nucor's highly successful business model that has allowed it to keep earning profits even under poor conditions.

Just a week ago, U.S. Steel said that it would have to take a charge of $1.8 billion against earnings to restate the value of its steel-production assets. The move reflects the ongoing problems in the industry, indicating that U.S. Steel believes the current value of the assets on its books is higher than their fair value.

In the U.S. Steel earnings report, watch to see how the company's guidance compares with what its peers are saying about the market. U.S. Steel needs an American economic recovery, and until it comes, the company could have trouble prospering.

These stocks should win in a recovery
U.S. Steel might be struggling, but with many global regions are still stuck in neutral, their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!

Click here to add U.S. Steel to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2701049, ~/Articles/ArticleHandler.aspx, 9/30/2016 6:31:59 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 4:02 PM
MT $6.04 Down +0.00 +0.00%
ArcelorMittal CAPS Rating: ***
NUE $49.45 Up +0.59 +1.21%
Nucor CAPS Rating: ****
X $18.86 Down -0.15 -0.79%
United States Stee… CAPS Rating: **