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U.S. Steel Drops Despite Raising Guidance

U.S. Steel increased its earnings forecast above analyst estimates, but shares were falling on Monday.
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Shares of U.S. Steel  (X)  were falling Monday after analysts digested the company's revised first quarter guidance, with BMO Capital analysts calling the forecast "good, but not great."

On Sunday, U.S. Steel provided an upward revision to its first quarter 2021 guidance with adjusted net earnings being recalculated to about $265 million, or $1.02 per share, up from 61 cents per share. Analysts polled by FactSet are expecting earnings of 84 cents per share. 

Sunday's announcement followed a Friday statement estimating that earnings before interest, tax, depreciation and amortization would be $540 million, higher than analysts' $522.1 million estimates. 

On Monday, BMO analyst David Gagliano raised his price target to $25 from $21 per share with a market perform rating as he said long lead times and lagged quarterly index prices suggest "additional significant incremental gains" in the second quarter.

Morgan Stanley's Carlos De Alba said the first-quarter guidance beat shows significant leverage in U.S. Steel's higher fixed-cost operating base, according to Bloomberg, and  expects its profitability to continue to improve in the coming quarters.

De Alba maintained his equal weight rating and $24 price target, but still advises investors to "await on the sidelines for a better entry point before turning more constructive." 

U.S. Steel shares were falling 8.1% to $22.22 in morning trading on Monday. They were one of the best-performing stocks last week, increasing 33.17%. 

“Strong market conditions and our well-timed acquisition of Big River Steel are allowing us to drive significant earnings growth,” Chief Executive Officer David Burritt said in the statement on Sunday. 

In January, U.S. Steel reported a fourth-quarter loss of 27 cents a share, bettering analysts' expectations of a 68-cent loss. Revenue of $2.56 billion came in ahead of the Zacks consensus estimate of $2.54 billion.

"We finished 2020 strong and are optimistic about the opportunity to deliver incremental value for our stakeholders in 2021," Burritt said at the time.