Text size
Ina Fassbender/AFP via Getty Images
Shares of
United States Steel
dropped Friday after the steel producer issued fourth-quarter Ebitda guidance below Wall Street expectations.
U.S. Steel (ticker: X) said it expects to wrap up the final quarter of fiscal 2021 with adjusted Ebitda of approximately $1.65 billion. Analysts were expecting Ebitda of $1.99 billion for the quarter, according to FactSet.
“Our fourth-quarter guidance indicates another quarter of strong performance yet reflects a temporary slowdown in order entry activity, which we believe is related to typical seasonal year-end buying activity,” said CEO David Burritt.
The company’s flat-rolled segment is expected to deliver adjusted Ebitda close to $1 billion in the fourth quarter. Tailwinds from increased steel selling prices were partially offset by cautious seasonal buying and higher raw material and energy costs, U.S. Steel said.
Energy costs also took a bite from the company’s European segment, which was also impacted by lower steel prices and unfavorable foreign exchange rates. The segment is expected to deliver lower Ebitda performance compared with the third quarter.
Management is expecting the mini-mill segment to deliver Ebitda margins similar to the third quarter despite lower volumes, and the tubular segment is expected to improve from the previous quarter.
Steel prices have been on a tear over the last year, but some analysts fear a slump may be ahead as new supply enters the market. Shares of competitor
Nucor
(NUE) tumbled Wednesday after its fourth-quarter projections fell short of Wall Street consensus.
Despite the fourth-quarter contraction, U.S. Steel remains bullish for 2022, and foresees a continuation of the “steel industry super cycle,” Burritt said.
“Next year, our fixed price contracts are resetting significantly higher, providing better earnings stability compared with competitors with more spot exposure,” he added.
U.S. Steel stock was down 1.7% to $23.05 on Friday. The stock has risen about 35% this year.
Write to Sabrina Escobar at [email protected]
