United States Steel (X) Dives on Weak Manufacturing Data

NEW YORK (TheStreet) -- United States Steel (X) plummeted on Monday following the release of poor ISM manufacturing data for January. By midafternoon, shares had taken off 4.4% to $24.97, compared to the S&P 500's 2.24% drop.

The steelmaker was sinking on a grim day for manufacturing-exposed stocks. Data from the Institute for Supply Management showed manufacturing growth in January at its weakest level since May 2013. The ISM index dropped to 51.3 from 56.5 in December, far below a 56 consensus forecast by Bloomberg-surveyed analysts. New order growth fell to 51.2 from 64.4, its biggest drop in 33 years.

Also adding to concerns of a weakening economy, Ford (F) and General Motors (GM) posted a 7.1% and 12% drop in January unit sales, respectively. The automakers blamed wintery weather and icy conditions for a lack of customers.

Last Monday, Pittsburgh-based United States Steel posted better-than-expected fiscal 2013 earnings. A net loss of $1.11 a share was less than the per-share loss of $1.22 expected by those surveyed by Thomson Reuters. However, full-year revenue of $17.42 billion fell short by $78 million.

TheStreet Ratings team rates UNITED STATES STEEL CORP as a Hold with a ratings score of C-. The team has this to say about their recommendation:

"We rate UNITED STATES STEEL CORP (X) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid stock performance, considering both the consistency and magnitude of the price movement over time. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • X, with its decline in revenue, slightly underperformed the industry average of 2.4%. Since the same quarter one year prior, revenues slightly dropped by 4.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • UNITED STATES STEEL CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, UNITED STATES STEEL CORP reported poor results of -$14.27 versus -$0.97 in the prior year. This year, the market expects an improvement in earnings ($1.67 versus -$14.27).
  • The gross profit margin for UNITED STATES STEEL CORP is currently extremely low, coming in at 4.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.85% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$7.00 million or 103.95% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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