US Steel Q3 Earnings Preview: Transformation And Strategic Acquisition In The Cards

Vertically integrated metals and mining player United States Steel X, best known as US Steel, is set to report its Q3 earnings after the market close on Oct. 26.

US Steel is currently considering its strategic options, eyeing potential synergy benefits. The company has received a $7.1 billion cash-and-stock acquisition offer from Cleveland-Cliffs CLF.

Also Read: U.S. Steel Brushes Off Cleveland-Cliffs’ $35 Per Share Offer: Analyst Says Deal Less Likely To Close Without ‘Meaningful Concessions’

US Steel Q3 Earnings: What Analysts Would Watch Closely

The company is the second largest U.S.-based steel producer, after Nucor NUE, and is undergoing a rapid transformation, having invested into mini mills, EAFs (electric arc furnaces) and downstream capabilities. The EAFs produce less carbon dioxide and are thus expected to benefit from the Inflation Reduction Act (IRA).

The IRA is the catalyst that could potentially boost EBITDA growth and free cash flow for the company. The Street knows that major capital investments such as these take time to translate into value, so analysts will be eager to get any hints of progress at these early stages.

X stock is trading at attractive valuations currently among competitors such as NUE, CLF, Reliance Steel & Aluminum RS, Ternium TX, Carpenter Tech CRS, Vale VALE and Ramaco Resources METCB.

Earnings Estimates: Wall Street analysts expect X to report $1.15 in EPS for the quarter and $4.39 billion in revenue, per earnings data available on Benzinga Pro. Given US Steel's history of beating estimates, the Street expects X to record a beat on EPS and revenue this time as well.

Over the last eight quarters, X stock has delivered six positive EPS surprises and six positive revenue surprises.

Analysts project that US Steel will report $4.12 in EPS for the fiscal year ending December 2023. Revenue estimates for that period are currently expected to come in at $17.9 billion.

Analyst Ratings & Price Targets: Wall Street analyst ratings (based on a pool of 120 analyst firms over the last 3 years) currently rate the stock Neutral. Consensus price target stands at $27.02 a share.

Price Action: US Steel shares have been range bound between $31.50 and $33.50 over the past month, and closed at $32.40 on Wednesday. The 52-week range is a low of $18.92 and a high of $33.65.

Read Next: US Steel Transformation Will Lead To Major Value Creation, Says Bullish Analyst

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