What Awaits U.S. Steel Stocks After An Uninspiring Q3?
Zacks Investment Research | Nov 22, 2019 07:11AM ET
The third-quarter earnings season for American steel stocks has been unimpressive as expected. U.S. steel makers continued to face the heat from weaker domestic steel prices in the September quarter. Lower prices put downward pressure on selling prices of these steel producers, hurting their bottom lines. Moreover, softer demand across certain key markets including automotive weighed on their performance.
Are U.S. steel companies bracing for more challenges ahead or is a rebound in the offing? But before we get to that, let’s take a quick recap of how major U.S. steel makers performed the third quarter.
How U.S. Steel Stocks Fared in Q3?
Third-quarter performance of prominent domestic steel makers paints a mixed picture. Nucor Corporation (NYSE:NUE) , the biggest U.S. steel maker, saw lower profits in the quarter, weighed down by lower shipments and steel prices. Its earnings of 90 cents per share surpassed the Zacks Consensus Estimate of 80 cents. However, revenues fell roughly 19% year over year to $5,464.5 million and missed the Zacks Consensus Estimate of $5,595 million.
Profitability in Nucor’s steel mills segment fell sequentially in the third quarter. Per the company, plate and sheet market conditions weakened in the quarter. Also, excess inventory throughout the supply chain led to continued destocking by customers.
United States Steel Corp. (NYSE:X) delivered better-than-expected results both on earnings and revenue fronts. Its adjusted loss of 21 cents a share for the quarter was narrower than the Zacks Consensus Estimate of a loss of 29 cents. Revenues fell roughly 18% year over year to $3,069 million on lower average realized prices, but beat the Zacks Consensus Estimate of $3,025.9 million.
Weak market conditions have forced the company to idle two of its blast furnaces in the United States and one in Europe. The company is re-scoping its asset revitalization investments and is taking actions to cut fixed costs amid a challenging market environment. The company completed three financing activities following the end of the third quarter which provided around $1.1 billion of incremental capital to support its strategy.
Meanwhile, Steel Dynamics, Inc. (NASDAQ:STLD) missed earnings and revenue expectations. Its earnings of 69 cents per share trailed the Zacks Consensus Estimate of 70 cents. Net sales fell around 22% year over year to $2,526.8 million and missed the Zacks Consensus Estimate of $2,618.7 million. Lower average steel pricing hurt its profits and sales. Reduced shipments and realized product prices dented results in its steel operations.
AK Steel Holding Corp. (NYSE:AKS) also came up with weaker-than-expected results. Its earnings of a penny per share missed the Zacks Consensus Estimate of 4 cents. Net sales fell around 12% year over year to $1,535.5 million and lagged the Zacks Consensus Estimate of $1,655.1 million.
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The company saw lower shipments to the distributors and converters market along with a sharp decline in carbon spot market prices. It trimmed its profit forecast for 2019, factoring in weaker carbon hot-rolled coil (HRC) spot market pricing. Per AK Steel, average spot HRC prices tumbled around 37% year over year to $562 per ton in the third quarter. Slumping prices prompted customers to place orders at minimum levels.
Nucor, U.S. Steel, Steel Dynamics and AK Steel each currently carry a Zacks Rank #3 (Hold). You can see Zacks Investment Research
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