US Steel Analyst 'Very Concerned' About Liquidity Following Guidance Update

United States Steel Corporation X shares dropped 9% on Wednesday after the company provided mid-quarter guidance that reminded investors of its liquidity challenges.

On Wednesday, Bank of America analyst Timna Tanners cut her 2020 U.S. Steel revenue and earnings forecast and said she's “very concerned” about the company’s liquidity situation.

The Numbers: The updated company guidance calls for a $315 million EBITDA loss in the quarter, excluding roughly $100 million in restructuring charges. The guidance is significantly worse than the $85 million EBITDA loss analysts were anticipating. Despite the worst-than-expected earnings guidance, U.S. Steel maintained its 2020 liquidity requirement estimate at $700 million.

Tanners cut her 2020 revenue estimate from $8.773 billion to $8.714 billion and raised her 2021 estimate from $10.588 billion to $10.600 billion. She also cut her 2020/2021 EPS loss estimates from -$5.45/-$4.50 to -$6.80/-$4.60.

Running Out Of Cash? Tanners is projecting a 2020 free cash flow of negative $1.1 billion and is forecasting $2.8 billion in cash burn through 2022.

“On our below consensus sub $500/st HRC forecast for 2021E/22E we see risk U.S. Steel runs through its cash in 2022E,” Tanners wrote in a note.

Bank of America has an Underperform rating and $3 price target for US Steel shares, suggesting nearly 70% downside from current levels.

Benzinga’s Take: Companies with weak balance sheets are most at risk during this period of economic uncertainty. On Tuesday, Tanners named Commercial Metals Company CMC as the best-positioned steel stock, especially if a U.S. infrastructure spending bill is ultimately passed.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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