U.S. Steel (NYSE: X) reported Q4 EPS of ($1.15), $0.56 worse than the analyst estimate of ($0.59).

Fourth quarter 2019 adjusted EBITDA is expected to be approximately ($25) million, which excludes approximately $225 million of estimated restructuring and other charges. While steel markets in North America are recovering, the Europe and Tubular segments remain weak. The Company expects fourth quarter 2019 adjusted diluted loss per share to be approximately ($1.15).

“While the current realities of the markets we serve are having a significant impact on our short-term results, we are taking swift action to align our operational footprint and financial strategy with our customers’ future to ensure we continue executing our ‘best of both’ integrated and mini-mill technology strategy,” commented President and Chief Executive Officer David B. Burritt. “Fourth quarter expected results confirm the need to change to make the business more resistant to factors outside of our control. While the decisions being made are difficult, we believe they allow us to drive increased stockholder value as we move towards our future faster with a more capital efficient footprint. We understand the impact today’s announcement to indefinitely idle Great Lakes Works has on many of our stakeholders, and we are acting now to reposition U. S. Steel around a footprint differentiated based on cost or capability.”

Burritt continued, “2020 will be an important year for strategy execution and we are taking decisive action to make changes to our capital deployment strategy that help us get to where we are going faster. With the reduced capital spending forecast and quarterly dividend adjustment announced today, we are preserving $100 million of cash in 2020 to support the continued execution of our ‘best of both’ strategy.”

Updates to 2020 Capital Spending Forecast:

• Capital Spending Flexibility – The Company is adjusting its 2020 capital spending forecast from $950 million to $875 million, a $75 million adjustment to the previously disclosed 2020 capital spending forecast, and reprioritizing spending across the enterprise to enable focus on previously announced strategic priorities.

Updates on Progress Towards Capital and Operational Cash Improvements:

• 2022 Capital and Operational Cash Improvement Target – As disclosed on the October 1, 2019 call regarding the investment in Big River Steel, the Company has set a goal of achieving as much as $1 billion in capital and operational cash improvements by 2022 through activities such as rescoping asset revitalization investments, reducing fixed costs and enhancing its ability to pursue opportunities to extract incremental value from excess iron ore pellets. The Company has reduced the Asset Revitalization program by $200 - 250 million to focus the remaining program around enhancements to the Gary hot strip mill capability advantages. Additionally, the Company has already completed actions (primarily labor reductions) to date that will generate annualized cost benefits of approximately $75 million in 2020 of the stated $200 million run rate fixed cost reduction by the end of 2021. The Company continues to assess options to create incremental value, primarily through its excess iron ore pellets and has expanded the scope to include real estate opportunities.

Updates to Capital Allocation Strategy:

Dividend Policy and Stock Repurchase Program Change – The Board of Directors has approved an adjustment of the quarterly dividend to $0.01/share, from $0.05/share, to support successful execution of the Company’s world-competitive, “best of both” strategy. This change in the dividend becomes effective as dividends are declared in 2020 and is expected to deliver approximately $25 million of annual cash savings beginning in 2020. In addition, as communicated on the third quarter earnings call, the Company has stopped repurchases under its stock repurchase program and now has decided to formally terminate the program. Currently, the Company believes that executing its world-competitive, “best of both” strategy is a better use of capital than maintaining the current dividend policy or continuing with stock repurchases. These components of the capital allocation strategy remain important to the Company’s capital allocation framework and will continue to be assessed regularly by the Board of Directors.

“Market dynamics reinforce the need to accelerate the world-competitive, ‘best of both’ company, ultimately centering our North American Flat-rolled footprint around three world-class assets (Big River Steel, Mon Valley Works, and Gary Works),” commented Burritt. “To get to the future faster, we remain focused on the successful execution of our strategic projects. Acquiring the remaining stake in Big River Steel continues to be our top strategic priority. We are monitoring the Phase II-A expansion of Big River and are encouraged by the progress. The EAF at Tubular remains on-budget and on-track to be operational in the second half of 2020. We remain committed to the Endless Casting and Rolling investment at Mon Valley and its timeline of first coil in 2022 and will continue to be flexible and execute investments at the Gary hot strip mill and Dynamo line at U. S. Steel Europe as market conditions warrant.”

GUIDANCE:

U.S. Steel sees FY2020 EPS of ($0.42), versus the consensus of $0.06.

The Company expects full year 2019 adjusted EBITDA to be approximately $682 million, which excludes approximately $285 million of estimated restructuring and other charges and approximately $47 million of estimated impacts from the December 24, 2018 fire at our Clairton coke making facility. The Company expects full year 2019 adjusted diluted loss per share to be approximately ($0.42). The projected net loss and diluted net loss per share for the fourth quarter and full year 2019 is preliminary and is subject to the Company’s ongoing assessment of the realizability of its deferred tax assets. The net deferred tax asset as of September 30, 2019 was $452 million. If the Company determines that a valuation allowance is required, a non-cash charge will be recorded in the fourth quarter of 2019.

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