Shares of United States Steel (NYSE:X) closed the trading day down 9.5% Friday -- which is kind of a strange result, when you consider that U.S. Steel beat earnings estimates last night, rather than missing them.
Expected to report a huge $2.82-per-share loss for its fiscal second quarter, on sales of only $1.84 billion, U.S. Steel instead reported a slightly less extreme loss of only $2.67 per share, and less-bad-than-expected sales of $2.09 billion.
So why did the stock collapse on the first day investors were able to trade on the earnings news?
Well, first and foremost, let's not gloss over the fact that U.S. Steel lost money. Adjusted net losses of $2.67 a share might not have been as bad as Wall Street forecast, but it was still pretty awful. Worse, $2.67 was only the stock's pro forma loss, adjusted for certain tax effects. When calculated according to generally accepted accounting principles (GAAP), U.S. Steel's actual loss was $3.36 per diluted share, a huge decline relative to the $0.39 per share profit the company earned in the year-ago quarter, bringing the company's total losses through the end of the first half of the year to $5.67 per share.
The story is similar when it comes to sales. U.S. Steel's sales declined less steeply than anticipated, but were still down 41% year over year for the quarter, and down 31% year to date. Even recognizing that much of this loss was due to the coronavirus doesn't mean the loss can be ignored entirely.
Nor does it mean losses are at an end for U.S. Steel. Management sounded a hopeful note in its report, saying it's "confident that the second quarter was the trough for the year." Still, U.S. Steel warned that "a portion of operating inefficiencies will continue to impact third quarter performance," and analysts forecast that, when all's said and done, U.S. Steel will end 2020 with a per-share loss approaching $6.