Steel stocks saw something a little foreign to them Tuesday -- a bit of hope.
The sector rallied on a mildly positive outlook from
. In addition, the nation's biggest steelmaker,
, benefited from news that parent
will spin it off. (U.S. Steel's stock is a tracking stock, or one that tracks the unit's performance.
, another USX unit, also trades as a tracking stock, but will become a separate publicly traded company.)
The Dow Jones Steel Index
gained 7.12% Tuesday, while U.S. Steel jumped $3.01, or 19%, to $18.90, Bethlehem climbed 67 cents, or 25%, to $3.34,
added $1.29, or 2.7%, to $49.55, and
was up $37 cents, or 8.2%, $4.87.
"The big news of the day in terms of company specific is USX's announcement that it is going to split up its oil and steel business. That's obviously good news for shareholders of both tracking stocks," said Craig Woker, an analyst at
, which doesn't underwrite stocks.
Meanwhile, Bethlehem, in releasing its first-quarter results, said, "We are beginning to see some modest improvement in certain of our markets, and we believe that steel market conditions in general will improve more meaningfully during the second half of this year. We are continuing to aggressively reduce costs and implement other actions to improve our cash flow."
Oregon Steel also offered a few encouraging words, saying it "expects to see improved volume in plate, large diameter pipe, ERW pipe and seamless pipe products, improved pricing in plate and rod products, and declining natural gas cost. As a result, the company expects to approach break even in the second quarter of 2001 and achieve profitability in the second half of the year."
However, the steel industry continues to face a very difficult environment, which has included steep levels of imports. For instance, Bethlehem Tuesday missed Wall Street's EPS estimate for the first quarter as it posted a loss of 99 cents a share. Four analysts polled by
Thomson Financial/First Call
were expecting a loss of 94 cents a share. A year earlier it posted a loss of 5 cents a share. Sales dropped to $900 million from $1.2 billion in the first quarter of 2000.
It also said that it expects to report a second quarter loss that is lower than that of the first. Wall Street is anticipating a loss of 72 cents a share.
"People have been saying it can't get much worse but they have been saying that for years," said Morningstar's Woker, who believes the broad steel rally will come to an end. "These companies have not overall made the investments to become lower cost producers. I don't hold out a whole lot of hope for a number of these companies."