US Steel Corp. (X) - Get Report shares surged the most in six months Friday after the struggling steelmaker posted a smaller-than-expected third quarter loss as domestic flat-rolled demand offset continued global steel market weakness.
US Steel said its adjusted loss for the three months ending in September was pegged at 21 cents per share, firmly ahead of the Street consensus of 29 cents per share after the group cautioned last month that its quarterly profits would sink and it would continue idling two of its main U.S. blast furnaces owing to "the impact of falling steel prices through the second quarter, combined with the impact of a larger than expected drop in scrap prices."
US Steel said its domestic flat-rolled steel earnings were pegged at $167 million, offsetting a European loss of $23 million. Net sales for the quarter, US Steel said, came in at $3.069 billion, down 17.7% from the same period last year but at the upper end of its revised October guidance, while looking into the 2020 calendar year, US Steel said it expects capital spending to be around $950 million, a $500 million reduction from prior estimates.
"The team delivered better than expected results from solid cost performance and higher than forecasted shipments in Flat-Rolled. While market headwinds persist, we continue to focus on what we can control, including re-scoping our asset revitalization investments and reducing fixed costs," said CEO David Burritt. "We also completed three financing activities since the quarter ended, which delivered approximately $1.1 billion of incremental capital to further support our strategy."
US Steel shares were marked 15.2% higher at the start of trading Friday, the biggest single-day move since May 3, to change hands at $13.29 each, a move that would still leave the stock nursing a 27% year-to-date decline.
Shares in the country's biggest steelmaker, have fallen more than 60% since President Trump first imposed a 25% tariff on imported steel in March of last year.
Last month US Steel said it would pay $700 million in cash for at 49.9% stake in Big River Steel, and hold an option to buy the remaining 50.1% stake by 2023, as the industry looks to consolidate amid a slowdown in global demand and the impact of import tariffs on non-US imports.
Including debts, as well as the expected expansion of Big River's flat-rolled mill in northern Arkansas, the deal could be valued at $2.35 billion, U.S. Steel said.
"Our investment in Big River Steel is strategic priority number one and we are already purposefully re-prioritizing our uses of cash towards investments most closely aligned with the business we are becoming," Burritt said. "We will be flexible managing the pace of our strategic investments to ensure we demonstrate the resiliency required to achieve the cost and capability differentiation of our world competitive strategy."
That move followed a profit warning from the Pittsburgh, Pa.-based group, which said it would likely post an adjusted third quarter loss of 35 cents per share and continue idling two of its main U.S. blast furnaces owing to "the impact of falling steel prices through the second quarter, combined with the impact of a larger than expected drop in scrap prices."