U.S. Steel Dips 6% On Higher-Than-Feared Loss Outlook, Street Sees 47% Downside

Shares of United States Steel Corporation dropped 6.3% in Thursday’s extended trading after the integrated steel producer projected a 4Q loss that exceeded analysts’ expectations.

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U.S. Steel (X) expects to report a loss per share of $0.85 in 4Q, significantly higher than the Street estimates of a loss of $0.56 per share as well as the year-ago quarter’s loss of $0.64. Meanwhile, it anticipates adjusted EBITDA of approximately $55 million.

Nevertheless, the company is experiencing improved demand across the US and European markets. United States Steel CEO David B. Burritt said, “Flat-rolled customer demand in the U.S. and Europe has improved throughout the fourth quarter, fueled by consumer-driven end-markets such as automotive, appliance, and packaging.” (See X stock analysis on TipRanks)

Burritt further added, “December’s performance has been particularly strong driven by the flow-through of higher steel prices, more nimble operations, and a continued focus on cost management. As a result, we have line of sight to significantly improved financial performance in 2021. Longer lead times, higher utilization rates, and higher input costs reflect current healthy steel demand and make us optimistic about the sustainability of today’s market environment.”

On Dec. 9, Morgan Stanley analyst Carlos De Alba initiated coverage on United States Steel with a Hold rating and price target of $17 (8.4% downside potential). Alba believes that the company is likely to benefit in the near-term from momentum in steel prices, but cautioned that capacity additions might start pressuring prices in the second half of 2021.

Overall, the Street is sidelined on the stock. The Hold analyst consensus is based on 2 Holds, 2 Buys and 2 Sells. The average price target stands at $9.86 and implies downside potential of about 46.9% to current levels. Shares have gained 62.7% year-to-date.