United States Steel Can Make a Comeback

United States Steel (X) announced fourth quarter ended December 31, 2015 net sales of $2.57 billion, down 9 percent sequentially from $2.83 billion in third quarter of 2015 and down 37 percent year-over-year from $4.07 billion in the fourth quarter of 2014.

US Steel Corp. declared fourth quarter of 2015 adjusted net loss of $33 million or $0.23 of adjusted diluted loss per share compared to adjusted net loss of $103 million or $0.70 per adjusted diluted share in third quarter of 2015 and adjusted net earnings of $274 million or $1.82 per adjusted diluted share in the fourth quarter of 2014.

A closer look

The key steel manufacturing company reported continued sequential and year-over-year decline in both its top and bottom line primarily due to the ongoing weaker global commodity demand and pricing environment, eating into the company’s key margins and forcing it to cut down on any of its core and non-core capital expenditures to preserve cash and operate profitably.

US Steel has illustrated positive EBITDA despite a tough global operating environment that highlights the company’s superior business strategy targeted towards controlling core and non-core expenses while growing free cash flows.
The steel company has generated positive adjusted EBITDA even among the weakest global utilization rate since the fiscal year 2009. However, imports continue to remain under pressure for all the company’s key business segments.

US Steel has achieved robust cash and an attractive liquidity position despite a continuing tough global operating environment through maintaining a strategic priority of executing a disciplined capital expenditure approach while continuing to operate on an efficient working capital management approach.

The impressive bottom line of US Steel is mainly driven by a strategic capital expenditure program which is targeted towards minimizing both core and non-core expenditures while sustaining enough free cash flows to drive comfortably through the continuing tough global operating environment.

The steel manufacturing company has registered robust performance during 2015, realizing approximately $815 million of consolidated Carnegie Way benefits for the year including flat-rolled, tubular, US Steel Europe and other businesses each achieving $647 million, $44 million, $115 million and $9 million respectively of key gains that highlights the company’s notable progress made on its way to achieving solid economic profit all through its business cycle. Going forward, the company is believed to witness nearly $250 million of carryover expenses during 2016 from some of the key projects that were executed at several occasions all through 2015.

What’s driving growth

The strategic Carnegie Way makeover approach of US Steel is enhancing its earnings capacity with the company having achieved $61 per ton of Carnegie Way gains for flat-rolled EBITDA in 2015 compared to last year. The Carnegie Way alteration approach is comprised of two phases including phase one, which is earning the right to expand by hunting for economic profits, customer loyalty and satisfaction and focused investments with process improvements. The second phase is delivering profitable growth through the implementation of focused mergers and acquisitions, highly-differentiated customer solutions and advanced technology with significant innovation.

US Steel is continuing to benefit from the unique Carnegie Way strategy but, this much does not seem enough to tackle extremely worse global economic conditions which are yet not witnessed to date.

Importantly, the Board of Directors at United States Steel Corporation recently declared a dividend of five cents per share on its common stock payable March 10, 2016, to all the key stockholders as of February 11, 2016 and in line with its continued commitment to deliver improved shareholder returns.


Overall, the investors are advised to “Sell” any equity held in the United States Steel Corp. considering the company’s weak financial position with significant total debt of $3.16 billion against a weaker total cash position of $755.00 million only, restricting the company to make future growth investments. The profit margin of -13.03% indicate no profit but loss. The PEG ratio of 0.16 signifies extremely weak company growth compared to somewhat healthier industry’s growth average of 0.35.
Published on May 27, 2016
By Yaggyaseni Mittra

Copyrighted 2020. Content published with author's permission.

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