United States Steel
reported better-than-expected third-quarter results. The stock isn’t moving though. There is a good reason for that.
U.S. Steel (ticker: X), on Thursday evening, announced third-quarter earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $578 million and earnings per share of $1.40 from sales of $4.4 billion. Wall Street was looking for Ebitda of $554 million and EPS of $1.12 from sales of just under $4.4 billion, according to FactSet.
It’s a nice earnings “beat.” The stock isn’t moving though. Shares were down 0.3% in premarket trading Friday.
S&P 500
and
Dow Jones Industrial Average
futures were up 0.5% and 0.2%, respectively.
There is a good reason for the muted stock reaction. The company is still in play. Investors need more clarity on management’s plan to sell the whole company or pieces of it. Or if management will just stand pat and continue to operate just as U.S. Steel does today.
U.S. Steel announced it was evaluating strategic alternatives in mid-August after receiving multiple unsolicited proposals that could have included a bid for the entire company or for some of U.S. Steel’s assets.
One bid from the entire company came from
Cleveland-Cliffs
(CLF). It has an offer on the table of $17.50 in cash and 1.023 shares of Cliffs for each share of U.S. Steel. Based on Thursday’s closing price, the bid values shares at $34.05 each, about 4.6% higher than the current price.
Trading below the deal value is one indication that investors don’t expect a materially higher bid from either Cleveland-Cliffs or a third party. There, of course, is no guarantee that investors are right about that.
“The Board of Directors, with the assistance of the management team and its advisors, is fully engaged in and is progressing a robust and
competitive strategic alternatives review process to maximize stockholder value,” said CEO David Burritt in the company’s earnings news release. “Meanwhile, we are focused on running our business safely, delivering on our commitments to customers.”
Management hosts a conference call at 8:30 a.m. Eastern time. Investors and analysts will be looking for an update about the company’s evaluation of strategic alternatives.
Coming into Friday trading, U.S. Steel stock was up more than 50% over the past year, buoyed by the Cliffs bid. Cliffs shares were up about 16%.
Benchmark steel prices have risen from about $730 a metric ton to $930 a metric ton over the same span. Rising steel prices are typically a big positive for steel stocks.
Write to Al Root at [email protected]
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