U.S. Steel stock plummets on poor Q3 outlook, industry outlook seems grim

U.S. Steel

The American steel sector has been taking a hit over the past few months. With manufacturing data showing signs of slowing down, some of the biggest companies in the industry are feeling the impact.

U.S. Steel (NYSE: X), a 120-year-old company that’s been the flagship stock of the sector, warned investors that it expects the second half of 2019 to be challenging financially due to falling prices and weak demand for steel.

Shares fell significantly in response to the news. U.S. Steel said that it projects a $0.35 loss per share in addition to suffering a $53 million hit from a major fire at one of its facilities. Third-quarter 2019 earnings are expected to come in at only $115 million, a disappointing figure for the steel giant. Even its European business has been struggling as profit margins continue to fall.

“In Europe, market conditions have continued to deteriorate, as the dislocation between steel selling prices and raw material costs continues to result in significant margin compression,” read an official statement from the company’s website.  “Based on current market conditions and the continued high level of steel imports into Europe, we do not expect to restart the currently idled blast furnace this year.  As a result, we reiterate our full year shipment guidance of approximately 3.6 million tons.”

Other steel giants have been warning investors that tough times are on the horizon as well. Steel Dynamics (NASDAQ: STLD) said to investors that it expects declining profits from its steel business. The country’s largest steelmaker, Nucor (NYSE: NUE), also lowered its financial guidance for the remainder of the year. All of these steelmakers have seen their shares fall significantly as well, with Steel Dynamics declining by 34% over the past year while Nucor is down 18% across the same time period.

The ongoing trade war between Beijing and Washington also hasn’t helped in this regard. While President Trump’s tariffs are meant to help boost the domestic steel industry, it might actually be hurting these companies more then it helps. U.S. Steel has since been forced to shut down multiple blast furnaces and lay off workers in Indiana and Michigan, a trend that Trump has promised to turn around but has failed to accomplish over the past years.

Shares of U.S. steel fell by 11.2 percent on Thursday. The $1.9 billion market cap company has seen itself lose most of its value so far in 2019, falling from the $20 price range to its current price at $11.06 per share. The general consensus among analysts is that the company doesn’t have a great future ahead of it, with the average price target based on 7 analyst’s sitting at $9.67. Based on current prices, this would mean that the stock could fall by another 10% in the future.

U.S. Steel Company Profile

U.S. Steel is an integrated steel producer, with 22 million tons of steelmaking capacity in the United States and Slovakia. The company produces flat-rolled and tubular products for a wide variety of end markets and applications. U.S. Steel also operates four iron ore mining sites and engages in rail and barge transport services. – Warrior Trading News