New York - Earlier this month, AK Steel and Nucor cut their estimates on Q3, and this has caused steel stocks to decline recently. US Steel has sunk over 10% since AK Steel updated its Q3 guidance on September 15. AK Steel is now expecting an operating loss for the quarter. Andy Kibbens CEO of The Markets Are Open noted that AK Steel’s results are dropping due to higher raw material costs something which won’t affect U.S. Steel since it is an integrated producer and has its own iron mines. Nucor also lowered its guidance saying profit would come in and 5 to 10 cents a share due to a higher scrap costs.
Kibbens noted that higher scrap costs are actually indirectly positive for U.S. Steel. He noted that if the costs of scrap are going up there is more demand for the industry in general. He noted that U.S. Steel is not a mini mill producer unlike Nucor and does not need to pay for scrap thus this bad news for Nucor does not effect U.S. Steel.
U.S. Steel should report its first profitable quarter since October 2008. U.S. Steel reported 198 million dollars income from operations in Q2 but the results sank due to a 96 million dollar impairment on a loan to a European subsidiary. However, the Euro has increased dramatically since the end of June and in the next quarter U.S. Steel will recognize approximately 119 million dollar gain from currency. This number is currently not being factored into anyones predictions for Q3.
Kibbens estimates U.S. Steel will earn 91 cents a share but stripping out one time gains from the Euro his estimate is 18 cents. Kibbens noted the mistake of many analysts to be comparing U.S. Steel to Nucor and AK Steel.
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