U.S. Steel Corp. (X) shares jumped higher Friday after the group said it's likely to post record second quarter earnings thanks in part to solid steel demand and higher shipping volumes.
U.S. Steel said adjusted earnings for the three months ending in June were forecast in the region of $3.83 to $3.88 per share, a 14.5% increase from last year's levels that would deliver a bottom line of around $1.6 billion, well ahead of Street forecasts.
Flat-rolled segment earnings are likely to be "meaningfully higher" than last year, with around a third of its annual 9 million to 9.5 million tones of shipments linked to fixed contract steel prices. The group's mini mill and Big River segments, which have been hit by falling steel prices, will likely deliver earnings that a flat to the first quarter, the company indicated.
“We expect to continue delivering record performance in the second quarter, with each business segment meaningfully contributing to profitability,” said CEO David Burritt. “Our broad end market exposure keeps our business resilient with demand across a diverse customer base, including the resurging energy market."
"Our focus on strategic end markets and the continued realization of significantly increased fixed price contracts is again expected to generate another quarter of record performance,” he added.
"Our balance sheet remains strong with an overfunded pension plan and no significant debt maturities until 2029," Burritt said. "Our strategic projects are pre-funded, with a current cash position approaching $3 billion, and we accelerated our stock buybacks in the second quarter."
U.S. Steel shares were marked 4.14% higher in early Friday trading to change hands at $20.40 each, a move that would trim the stock's year-to-date decline to around $14%.
U.S. Commerce Secretary Gina Raimondo indicated earlier this month the President Joe Biden is likely to keep existing tariffs on China-made steel in place, even as he considers removing other tariffs as part of his effort to slow the fastest inflation in forty years.
That said, prices for American-made hot-rolled coil are down sharply from their early April peak of $1,500 per ton -- and trending towards $1,000 per tone -- amid rising output capacity and the prospect of near-term U.S. recession.
"Better results vs. our model were likely driven by Flat Rolled and Big River Steel, each on volumes, responding to the post RUW panic-driven hedge buying, which has now aggressively ceased, as have pricing dynamics in U.S. and European HRC," said KeyBanc Capital Markets analyst Philip Gibbs of the U.S Steel update.
"Tubular is expected to increase sequentially, directionally consistent with our view, with pricing continuing to elevate on domestic restocking ahead of more drilling activity," he added.
