(Corrects to show that AK Steel’s adjusted quarterly profit of 2 cents per share is excluding expenses of $6.2 million, paragraph 18)
* U.S. Steel sees lower Q4 operating results
* AK Steel declines forecast, cites uncertainty
* Shares slump despite Q3 earnings beats
By Steve James
U.S. Steel, which beat estimates in the third quarter, “could be going back into the red in the fourth quarter,” said analyst Michelle Applebaum of Steel Market Intelligence.
Analyst Mark Parr, of KeyBanc Capital Markets, said U.S. Steel’s fourth-quarter outlook suggested EBITDA, or earnings before interest, taxes, depreciation and amortization, would be below Wall Street expectations.
“But we believe investors had not built much faith in fourth-quarter expectations given the recent declines in flat-rolled pricing realizations and choppy macro data,” Parr wrote in a research note.
In Tuesday morning trading on the New York Stock Exchange, AK Steel was down 12.6 percent at $7.56, while U.S. Steel fell 6.7 percent to $23.09.
The gloomy assessment came after Nucor Corp (NUE.N), the largest U.S. steelmaker, last week forecast market deterioration for the rest of this year as demand is weak in some sectors and imports are driving down steel prices.
U.S. Steel Corp posted a better-than-expected third-quarter profit, but warned fourth-quarter profit would weaken due to the soft economies in Europe and North America.
Although it turned a profit after a net loss in the year-ago quarter, overall results were down sharply from the second quarter of this year, with steel prices decreasing.
“Results continue to reflect the difficult economic situation in Europe, particularly in Southern Europe,” Chairman and Chief Executive Officer John Surma said in a statement.
Although the company’s flat-rolled segment performed well in the third quarter, Surma said there was “a less than robust economy in North America.”
He said U.S. Steel’s tubular business expected fourth-quarter results to be in line with the third quarter.
“(But) We expect to report lower operating results in the fourth quarter for our North American flat-rolled and European operations as a result of the slow and uneven economic recovery in those regions.”
Surma said average realized prices and shipments are expected to decline through “cautious purchasing patterns created by the uncertain economic outlook and increasing domestic supply.”
Net income in the third quarter was $22 million, or 15 cents per share, compared with a net loss of $51 million, or 35 cents per share, a year earlier, the Pittsburgh-based company said. Excluding one-time items, earnings per share were 72 cents, well above the 52 cents per share that analysts had forecast, according to Thomson Reuters I/B/E/S.
Sales rose 13 percent to $5.08 billion.
AK Steel Holding Corp’s quarterly results also beat Wall Street estimates but the steelmaker declined to give any outlook for the rest of the year, citing uncertainty and volatility in the U.S. economy and other markets.
“Challenging global economic conditions have created strong headwinds for our company and our country,” Chairman, President and Chief Executive Officer James Wainscott said.
AK Steel posted a third-quarter net loss of $3.5 million, or 3 cents per share, compared with a loss of $59.2 million or 54 cents per share, for the 2010 quarter. But excluding expenses of about $6.2 million, or 5 cents per share, for repairs to an electric steelmaking furnace at its Butler Works, AK Steel reported an adjusted profit of 2 cents per share.
On that basis, it beat analysts’ expectations for a loss of 1 cent per share, according to Thomson Reuters I/B/E/S.
The West Chester, Ohio-based steelmaker said sales for the third quarter were $1.585 billion, on shipments of 1,368,800 tons, compared with sales of $1.575 billion, on shipments of 1,465,800 tons for the year-ago third quarter.
AK Steel’s average selling price was $1,158 per ton, a 2-percent decrease from the second quarter of 2011, but about 8 percent higher than for the third quarter of 2010. (Reporting by Steve James, editing by Dave Zimmerman)