U.S Steel (X, Financial) once again reported good results for the quarter, which were mainly driven by the progress that it is seeing with the Carnegie Way Transformation. This is helping the company in multiple ways. U.S Steel is making good progress with its product pipeline. It is now focusing on several initiatives that might drive U.S Steel’s profitability. It has a good pipeline of value creating projects, which are showing positive signs. U.S Steel is now focusing on systematic execution and implementation of these projects.
Improving in a systematic manner
The company is expecting a successful implementation of these projects. If it works out well it is expected to improve its results by additional $85 million which will be a great contribution to its financial status. U.S Steel is laser focusing on the transformation of Carnegie way. It is mainly focusing on making profit in this economic cycle which will help the company to deliver better returns to the stock holders. The company is striding to improve its margins and to make it happen it is working on creating a good cost structure.
U.S Steel is under a process of implementing new management structure which is focusing on some key aspects that are helpful for U.S Steel. At first it focuses on collaborating better with the customers to create and deliver smarter and more innovative solution in the markets in which it operates. Further, it is focusing on Carnegie Way projects within the operating units which will include reliability-cantered maintenance, process technology excellence and continued commitment to safety and quality. In this way it will be in a good position to create stockholder value and continue earning the right to grow by creating clear and more focused accountability.
Focus on reducing costs
The company’s focus on reducing the cost structure is well on track. It is checking its maintenance spending. U.S Steel is now creating more efficiency in its maintenance practises. It is now undertaking a proactive approach instead of a reactive approach. Such a reduction in the maintenance costs will help the company to strengthen its cost structure and is expected to create a long term value for the company.
With the growth in the economy U.S Steel is strong growth along the automotive segment. The growth in the economy will lead to lower interest rates that will create good demand for more auto-motives improving the demand for steel. The company is expecting positive trends for the steel demand in future but the increase in the steel import might present some problems for the U.S Steel in future and can eat its profit margins in the days to come.
Conclusion
Moving on to the fundamentals, the stock seems expensive with a trailing P/E of 48.37. Its earnings are showing poor growth with a forward P/E of just 8.83. Also, in a long run its earnings are weak with a CAGR of 6.50% in next five years. This indicates that the earnings growth is slow so I would like to suggest the investors to stay away from the stock as it will take some more time to gain market share.
