United States Steel Corp. may provide some insight into the state of the global economy when it reports second-quarter results Tuesday before the market opens.
WHAT TO WATCH FOR: Analysts expect U.S. Steel to join a string of steel manufacturers that have turned in disappointing results for the second quarter, which historically is the strongest three months of the year for the industry.
Nucor Corp., AK Steel Holding Corp. and ArcelorMittal all reported weaker earnings from April through June, blaming anemic demand.
Economic growth has slowed in the U.S. and China. Some European countries are back in a recession as the region struggles with a massive debt crisis. Manufacturing has slowed on all three continents. Slower growth translates into less demand for steel.
Prices for hot-rolled coil steel have fallen to around $630 per ton since hitting a peak near $800 per ton in March. “It’s really difficult to make money at that price,” Morningstar Inc. analyst Bridget Freas said.
Steel demand has been weak from the construction industry and agricultural equipment manufacturers and for use in infrastructure projects. There have been areas of improving demand such as automobile manufacturers and the energy industry.
Shares of U.S. Steel dropped nearly 30 percent in the quarter, ending at $20.60 per share on June 29.
WHY IT MATTERS: U.S. Steel, headquartered in Pittsburgh, makes products used in various industries from construction and automobiles to appliances and pipes for the energy industry. The pace of the economic recovery can be gauged in part from the sales that it makes to its broad customer base.
WHAT’S EXPECTED: Analysts, on average, expect net income of 48 cents per share on revenue of $5 billion, according to FactSet.
“In general, the second quarter didn’t pan out to be as strong as maybe people would have thought earlier in the year,” Freas said. “I don’t think we had quite the seasonal pickup that you would expect.”
LAST QUARTER: U.S. Steel reported net income of $222 million, or $1.33 a share. Revenue totaled $5.12 billion.
