On Tuesday, U.S. Steel (NYSE:X) will release its quarterly report, and after years of struggling with losses, investors are finally hopeful that the company is turning the corner toward sustained profitability. Even though rivals Nucor (NYSE:NUE) and Steel Dynamics (NASDAQ:STLD) have found it easier to keep making money during tough times in the steel industry, U.S. Steel expects to benefit from improving conditions in the U.S. economy. Given how far U.S. Steel's stock has fallen, any sign of better times ahead could produce an outsized return for venturesome investors.

The steel industry has been one of the hardest hit in the global slowdown in construction and infrastructure activity, as the inevitable cyclical fluctuations in the business cycle have produced a particularly strong downward period for steel prices. A glut of production from overseas companies has also contributed to U.S. Steel's woes. But with some signs of life in the U.S. economy, can U.S. Steel finally become profitable again? 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.

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Source: U.S. Steel.

Stats on U.S. Steel

 

 

Analyst EPS Estimate

$0.32

Year-Ago EPS

($0.35)

Revenue Estimate

$4.51 billion

Change From Year-Ago Revenue

(1.8%)

Earnings Beats in Past 4 Quarters

3

Data from Yahoo! Finance

Can U.S. Steel earnings keep recovering?
Analysts have had mixed views about U.S. Steel earnings recently, slashing first-quarter estimates by $0.25 per share but raising their views for the full 2014 and 2015 years by about 10% each. The stock has held its own, with flat performance since late January.

U.S. Steel's fourth-quarter earnings report showed the struggles that the steel company has continued going through lately. The company managed to post an adjusted net profit for the quarter, after taking out restructuring charges and tax-related gains. But sales fell almost 5%, and results in U.S. Steel's tubular-steel segment were weaker than in the previous quarter, despite improvement in its European segment. CEO Mario Longhi emphasized the long-term nature of U.S. Steel's turnaround, pointing to incremental gains as milestones on a "multi-year journey to earn the right to grow."

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Different conditions throughout the global economy explain some of the challenges that U.S. Steel is going through right now. The World Steel Association expects steel demand growth worldwide to slow to 3.1% this year, down half a percentage point from 2013. Yet much of that reduction has come from China, where growth rates are expected to be cut in half. Meanwhile, in the U.S. and Europe, steel demand growth is expected to rise faster than in China, a big reversal of fortune from previous years. Yet even though U.S. Steel's domestic market could look more inviting, cheap imports from China and other lower-cost producers could continue to weigh on its profit opportunities, as well as those of Nucor and Steel Dynamics.

In response, U.S. Steel, Nucor, and other steel producers have called on lawmakers to restrict cheap steel imports while spending more on much-needed infrastructure projects. Steel companies have gotten mixed results from trade disputes, as one preliminary finding from the International Trade Commission suggested that anti-dumping measures might take place. But an adverse ruling from the Commerce Department in February held that South Korean producers weren't selling tubular steel below cost, putting a speed-bump in efforts to make trade fairer in the industry.

Meanwhile, a trend among automakers to look into lighter-weight materials could pose new problems for U.S. Steel. The new 2015 F-150 uses an all-aluminum body, making it easier for its manufacturer to raise its fuel efficiency. Aluminum is more expensive than steel, but if new designs prove as durable and safe as heavier steel bodies, then U.S. Steel could see more manufacturers follow suit. Given how much the steel industry has benefited from growth in auto demand, that trend could be a big threat to U.S. Steel's recovery.

In the U.S. Steel earnings report, watch to see if the company can see more improvement in various market segments. Without consistent profitability, it'll be hard for U.S. Steel to demonstrate to skeptical investors that its turnaround is for real.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.