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This Steel Company Is Making a Strong Comeback

August 22, 2014 | About:
prabhat71

prabhat71

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United States Steel (X) recently released better results in the second quarter as compared to the last year’s same quarter. Though the company posted a loss, the loss narrowed by a big margin as compared to its previous results. United States Steel’s turnaround strategies are working and as a result of good numbers on the board, its shares soared. Seeing United States Steel's growth, investors are bullish about its improvement in the future.

Even management thinks that the company has slowly regained its lost momentum. With the future looking bright and prospects strong, United States Steel can be good long term holding. Let us see how.

Gaining momentum

U.S. Steel reported a loss of $18 million, which is narrower than the loss that ccurred in last year’s same quarter. The company managed to narrow the loss from $78 million, which is impressive. The company is regaining its operational fluency and as a result, its net income came in at $25 million. Due to many operational challenges, the company couldn’t maintain smooth growth in sales, and as a result, sales remained flat at $4.4 billion. However, the results show that it is never too late for U.S. Steel.

U.S. Steel’s performance in the last quarter was commendable as the company kept its spirits high and managed to deliver better results despite harsh weather conditions. The credit for such a robust performance goes to its fine management operations. Further, in this line, management is optimistic about U.S. Steel's upbeat performance and is also confident of achieving better financial levels in the future.

Aiming for better times

U.S. Steel is focusing on various aspects to tap the market and gain good market share in the future. Moreover, this vision seems to be strong for U.S. Steel as the company is seeing a lot of opportunities in North America. The North American market is bouncing back with a good pace. The market was under pressure due to harsh weather, but now it seems that the segment is showing positive signs with an increase in demand for steel consumption.

With the improvement in the manufacturing and construction businesses, the demand for steel is reaching new highs, which presents a golden opportunity for U.S. Steel. Also, with the automotive segment gaining steam, as a result of the improving U.S. economy, this is also a key growth driver for the company. With this growth in the automotive segment, the demand for steel will improve with the ramp up of automobile production.

Moving on, inventory levels are also expected to improve. For example, in the past, both the U.S. and Canadian service center inventories were operating typically below normal levels, but shipments from these have increased considerably over time and are now shipping at higher volumes. However, above all this, U.S. Steel is worried about the high prices of steel. But, the company thinks that a strong demand for steel will help it keep steel prices relatively low.

Opportunities ahead

U.S. Steel is also looking to capture the opportunities in on-shore horizontal oil drilling. The company is anticipating the U.S. rig count to reach the highest levels soon, which will increase the operator consumption of OCTG. Due to this, oil prices are expected to remain around $100 per barrel, which is a good sign for U.S. Steel. However, natural gas prices are expected to remain high in the third quarter as well. So, for U.S. Steel, the natural gas segment will remain relatively poorer than oil-directed drilling.

Conclusion

U.S. Steel is seeing a turnaround in the business. The improving conditions in the end markets will allow the company to benefit in the long run. Hence, it is a stock worth considering for investors' portfolios.


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