U.S. Steel Beats in 4Q, Trims Loss (AKS) (NUE) (STLD) (X)

Barring a favorable settlement associated with a supplier contract dispute, net loss was 41 cents a share, lower than the Zacks Consensus Estimate of a loss of 75 cents.

Revenues for the fourth quarter fell nearly 7% year over year to $4,487 million, yet beat the Zacks Consensus Estimate of $4,396 million. The largest U.S. steel maker (by volume) faced continued economic challenges and pricing pressure in the quarter.

U.S. Steel, like other steel makers including Nucor Corporation (NUE), AK Steel (AKS) and Steel Dynamics Inc. (STLD), is contending with oversupply in the U.S. steel industry and pricing pressure. Oversupply and increased steel imports into the domestic market continues to put pressure on steel prices.

For full-year 2012, the company recorded a net loss of $124 million or 86 cents a share, a more than two-fold year over year surge from a loss of $53 million or 37 cents per share reported a year ago. Net loss in 2012 included a loss of $353 million from the sale of U.S. Steel Serbia.

Revenues for the full year fell roughly 3% year over year to $19,328 million.

The Pennsylvania-based company’s shares rose 1.85% in pre-market trading.

Segment Highlights

The company’s Flat-rolled segment raked in a profit of $11 million in the fourth quarter compared with a loss of $72 million reported a year ago. However, profit fell 62% sequentially due to a drop in average realized prices of steel and shipments. Average realized price was $721/net ton in the quarter, down $20 per ton on both sequential and year over year basis. The segment was affected by high flat-rolled steel import levels.

U.S. Steel Europe (USSE) recorded a profit of $7 million in the quarter, representing an improvement over last year’s loss of $89 million. However, profit slipped 74% sequentially due to lower pricing. Average realized price declined 7% year over year and 2% sequentially to $718 per net ton due to weaker spot market prices.

U.S. Steel’s Tubular segment’s profit tumbled 73% year over year to $32 million due to lower pricing and shipment. Average realized price declined 5% year over year and 3% sequentially to $1,624 per net ton. Increased import levels and lower drilling activity by end users affected pricing and shipment in the quarter.

Financial Condition

U.S. Steel ended 2012 with cash of $570 million, up nearly 40% year over year. Long-term debt increased roughly 3% year over year to $3,936 million.

Outlook

Moving ahead, U.S. Steel expects its first-quarter 2013 results to be affected by sustained economic uncertainty. The company expects near breakeven results for the Flat-rolled segment in the first quarter and envisions higher shipment on a sequential basis. Average spot prices are expected to improve from the fourth quarter level while raw material costs have been predicted to decline.

The USSE segment is expected to post better results sequentially on the back of higher shipments. Average realized prices are expected to decrease compared with the fourth quarter.

The company also expects the Tubular segment to post better results in the first quarter sequentially on decreased costs and higher shipments. Average realized prices are expected to be modestly lower compared with the fourth quarter.

U.S. Steel currently carries a short-term Zacks Rank #3 (Hold).