What happened

Shares of United States Steel (NYSE:X) fell nearly 14% in the first half-hour of trading on Thursday, following steep losses the day before. Company news was to blame in both cases.

So what

On Wednesday, U.S. Steel announced that it expected second-quarter earnings to come in well below Wall Street expectations. Not surprisingly, the stock fell sharply on the news. But the company wasn't done with the big announcements, releasing another bit of bad news after the market had closed.  

Man writing on notebook while standing in a steel mill

Image source: Getty Images

Despite a stock price that is down around 60% over the past three years (and off about 80% from its high over that span), the company sold 50 million shares. The underwriter has the option to buy another 7.5 million shares, which would increase the total by a huge 15%. The goal of the equity raise is to shore up U.S. Steel's balance sheet.

That's not a good sign when the company is reporting that earnings are set to come in below analyst expectations. And it speaks to longer-term issues (notably a heavy debt load) that are still hampering the company. Again, not surprisingly, the stock sold off when markets opened on June 18.   

Now what

Earlier in the week, steel stocks rallied on reports that the White House is pushing for a massive infrastructure plan. While that's good news for the broader infrastructure space, including steel names, every company isn't on equal footing.

In this case, U.S. Steel is clearly showing that it has company-specific issues that need to be addressed. Long-term investors should make sure they do their homework and understand the underlying stories of the companies they are looking at before hitting the buy button. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.