U.S. Steel (X) CEO Mario Longhi Steps Down Post Dismal Q1
Zacks Investment Research | May 14, 2017 09:45PM ET
Mario Longhi has stepped down as Chairman and CEO of U.S. Steel (NYSE:X) and will retire from the company at the end of Jun 2017. The move came roughly a couple of weeks after the Pittsburgh-based steel major announced dismal first-quarter results that caused its shares crash as much as around 27%.
U.S. Steel noted that Longhi will remain on its board and provide transitional support until his retirement. David B. Burritt – the incumbent president and chief operating officer (COO) – has been elected by the company’s board to assume the role of president and CEO.
Longhi, who started his career at U. S. Steel in 2012 as executive vice president and COO, was promoted to the role of president and CEO in the following year. He played a crucial role in the implementation of the “Carnegie Way" initiatives aimed at improving cost structure, operational efficiency and profitability. These efforts delivered $745 million of benefits in 2016. However, even these actions have failed to steer the steel maker out of its current predicament.
U.S. Steel, last month, came out with lackluster first-quarter 2017 results, missing analysts' estimates on both earnings and revenues. The company suffered a sizable net loss of $180 million on a reported basis in the reported quarter.
The disappointing results coupled with the company’s downward guidance revision sparked huge sell-off as U.S. Steel’s stock suffered the biggest one-day drop a day after the earnings release since it went public in 1991.
U.S. Steel has seen its shares sag roughly 39% year to date, underperforming the Zacks categorized Steel-Producers industry’s decline of around 6%.
U.S. Steel has cut its earnings and EBITDA guidance for 2017. The company now sees EBITDA of roughly $1.1 billion for the full year, down from its earlier expectations of around $1.3 billion. Moreover, the company now expects to post net earnings of around $260 million or $1.50 per share in 2017 compared with net earnings of $535 million or $3.08 per share it expected earlier.
The company, in its first-quarter call, said that it remains exposed to a cyclical industry and aims to revitalize assets to achieve more reliable and consistent operations, improved quality and cost performance.
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U.S. Steel is implementing an asset revitalization plan aimed at improving its profitability and competitiveness. The plan, a part of the Carnegie Way initiative, is expected to take 3-4 years for its full implementation. The company plans to invest around $300 million in asset revitalization in 2017, higher than 2016 level.
However, the company expects more downtime in its facilities this year due to this program that will limit its steel production volumes. Accelerated implementation of this plan is expected to affect flat-rolled shipments volumes in 2017.
U.S. Steel continues to face certain operational issues in its Flat-Rolled division, which is hurting the results of this unit. Increased outage costs, operating inefficiencies and higher plant maintenance costs affected this division in the first quarter. The company sees higher plant-related spending moving ahead as it accelerates asset revitalization investments and efforts.
U.S. Steel is a Zacks Rank #3 (Hold) stock.
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