US Steel Corp (X) – Received report from United States Steel Corporation Shares fell lower Friday after the group forecast record third-quarter profits and unveiled plans for a new factory to begin production in 2024.
US Steel said it expects adjusted profit for the current quarter of about $2 billion, up 50% from the prior period, as it begins a site selection process for a $3 greenfield electric arc furnace (EAF)-based plant. billion likely to increase flat-rolled steel production by about 20%. Analysts suggest current locations in Pennsylvania’s Mon Valley and Granite City, Illinois could be vulnerable to closure once the new facility is complete.
US Steel also said it has reduced its total debt by about $2.7 billion so far this year, excluding debt related to its 2019 acquisition of Big River Steel.
“We expect the third quarter to be a quarter of the records for US Steel. Supported by strong reliability and quality performance, continued customer demand and continued increases in steel selling prices, we expect our ‘Best for All’ business model to generate record quarterly adjusted EBITDA and EBITDA margins, enhancing the strength of demonstrates our strategy,” said CEO David Burritt.
“We remain optimistic that market fundamentals will support a stronger steel market for longer and we have accelerated the pace of deleveraging to pave the way for a faster transition into our ‘Best for All’ future.” he added. “Our best days are coming.”
US Steel shares, which have gained about 48.2% so far this year, were down 1.6% on Friday, pointing to an opening bell price of $25.30 each.
“It is early in the day after this announcement, but in our view it does increase the risk of another wave of longer-term capacity expansions in the US, which we believe will put a dent in the higher-for-longer thesis. (for broader steel prices) move,” said BMO Capital Markets analyst David Gagliano, who has a market performance rating with a $33 price target for the stock.