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U.S. Steel (X) Tops Q4 EPS Views; Offers FY15 Outlook

January 27, 2015 4:34 PM EST

U.S. Steel (NYSE: X) reported Q4 EPS of $1.83, $0.96 better than the analyst estimate of $0.87. Revenue for the quarter came in at $4.07 billion versus the consensus estimate of $3.96 billion.

Commenting on results, U. S. Steel President and Chief Executive Officer Mario Longhi said, "We are pleased to report another quarter of strong operating results, which continue to reflect the significant and sustainable improvement in our earnings power from our Carnegie Way transformation efforts."

Total reportable segment and Other Businesses income from operations of $420 million, or $92 per ton, for the fourth quarter of 2014 compares to income from operations of $479 million, or $94 per ton, in the third quarter of 2014 and income from operations of $146 million, or $30 per ton, in the fourth quarter of 2013.

2015 Outlook

Commenting on U. S. Steel's outlook for 2015, Longhi said, "Our Carnegie Way progress so far has exceeded our expectations in this multi-year journey. We expect to continue to generate benefits from our transformation which focuses on creating value through sustainable improvements in our business model and earnings power."

We anticipate that the global economy in 2015 will expand at a moderate rate, with U.S. economic growth of approximately 3% and European economic growth of approximately 1%. Steel demand tracks directionally with GDP, and our view is that we will continue to see low single digit growth rates in each region, which is broadly consistent with worldsteel Association projections. We expect that the depressed oil prices will have a negative impact on our Tubular segment. Although this will also be a headwind for our Flat-rolled segment, we are encouraged by the potential that improved consumer spending could provide to overall flat-rolled demand. We may continue to experience high levels of imports, which we believe in many cases are unfairly traded. Moreover, our earnings from USSK are likely to be negatively affected by foreign exchange rates, particularly the strengthening of the U.S. dollar.

We are focused on creating economic profit throughout the business cycle. Our balance sheet and liquidity are stronger, and our healthy cash flows give us the strategic flexibility to continue to improve our performance under this set of market conditions. We are confident that the Carnegie Way will continue to deliver meaningful improvements helping to offset headwinds throughout 2015. With our strong balance sheet and continued Carnegie Way improvements, we are in a much better position to respond quickly to challenging market conditions, and our improved earnings power will enable us to be more profitable during these market conditions than we have been in the past.

Focusing on short term fluctuations in a volatile environment is contrary to the foundations of the Carnegie Way transformation. We believe that value creation comes from a sustained improvement in earnings power across the business cycle and to achieve our ultimate goal of delivering economic profit, we cannot be deterred by short term volatility in our markets. Consistent with this strategy we will provide quantitative annual earnings guidance as we believe it provides all of our stakeholders with a more informed view of our earnings potential as compared to a short term quarter to quarter perspective.

We have proven in 2014 that we can respond to challenging headwinds. As we enter 2015 with this volatile market, we face significant challenges from dramatically lower oil prices, lower steel prices, and the impact of the stronger U.S. dollar and global overcapacity on imports and our operations, but we expect our Carnegie Way journey to continue to generate additional benefits in 2015, including healthy cash flows, strong liquidity, and sustaining our improved balance sheet. Based on all of the factors described above, we expect full-year 2015 adjusted Income from Operations to be between $550 million and $850 million, or adjusted EBITDA of between $1.1 billion and $1.4 billion.

For earnings history and earnings-related data on U.S. Steel (X) click here.



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