Shares of United States Steel Corporation (NYSE: X) rebounded impressively by 5.4% in the extended trading hours on Thursday after declining 4.9% in the normal session. The share price was $19.58 at the end of normal hours.
The projections for the second quarter of 2022 had lifted the market sentiment for the integrated steel maker’s stock. However, the stock has now given up most of its gains and is only up 0.3% today.
Inside the Headlines
United States Steel anticipates adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) in Q2 to be $1.6 billion. Also, it expects adjusted earnings of $3.83-3.88 per share in the quarter.
It is worth mentioning that the EBITDA projection is higher than the $1.3 billion recorded in the first quarter of 2022 and $1.26 billion in the second quarter of last year. The company views Q2-2022 EBITDA to be the best in the company’s history, considering Q2 of any year.
The President and CEO of United States Steel, David B. Burritt, said, “We expect to continue delivering record performance in the second quarter, with each business segment meaningfully contributing to profitability.”
As noted, the Flat-Rolled segment is expected to benefit from demand-driven volumes and a lack of disturbances caused by seasonal headwinds. Adjusted EBITDA for Q2 will exceed the Q1 level.
The hike in metallics costs and low selling prices (average) is predicted to offset the impact of higher orders for the Mini Mill segment. Q2 EBITDA will likely be in line with the Q1 level.
Also, high demand for seamless pipes, especially from the energy market, and better selling prices are likely to support improved Q2 EBITDA performance for the Tubular segment.
The U.S. Steel Europe segment is anticipated to gain from higher selling prices, partially offset by the Ukraine-Russia war-induced hike in raw material costs. Adjusted EBITDA in Q2 will be higher than the Q1 level.
In addition to its Q2 projections, the company communicated that its balance sheet is solid, with a cash position nearing $3 billion. Also, share repurchases are among its priorities, having bought back shares for $320 million so far in Q2. It is left to repurchase $210 million worth of shares under its approved programs.
David B. Burritt said, “Our broad end-market exposure keeps our business resilient with demand across a diverse customer base, including the resurging energy market.”
“Our focus on strategic end markets and the continued realization of significantly increased fixed-price contracts is again expected to generate another quarter of record performance,” added Burritt.
Wall Street’s Take
On TipRanks, United States Steel has a Moderate Sell consensus rating based on three Holds and two Sells. The average United States Steel price forecast of $25 suggests a 27% upside from the current levels. Over the past year, shares of X have declined 24%.
On June 14, 2022, Michael Glick of J.P. Morgan maintained a Sell rating on X while lowering his price target to $28 (42.3% upside potential) from $34.
Per the TipRanks tool, the number of TipRanks portfolios with investments in X stock has decreased by 0.2% in the last 30 days. The investor sentiment on the stock is Negative.
Solid adjusted EBITDA and earnings projections for the second quarter of 2022, along with a sound cash position and rewards to shareholders (via share repurchases), might help improve the investment appeal of United States Steel.