US Steel (X), a major producer of steel in the US and Europe, is trading nicely higher today (+13%) after reporting Q3 results last night. In case you're not familiar, US Steel is an integrated steel producer of flat-rolled (primarily used in automotive/appliances) and tubular (primarily used for oil pipelines) steel products with major production operations in North America and Europe.
Unlike a mini-mill, like Nucor (NUE) and Steel Dynamics (STLD), which makes new steel by melting scrap steel in an electric arc furnace (EAF), an integrated producer makes steel from raw materials (iron ore and coke) using what's called a blast furnace.
Turning to the Q3 results, adjusted EPS came in at a $0.92, which was much better than market expectations and up sharply from the $0.40 result in the prior year period. Revenue rose 20.9% year/year to $3.25 bln, which also was better than expected.
Adjusted EBITDA is always a key metric for US Steel and that jumped 26% YoY to $342 mln although it was down a bit from $362 mln in Q2. In terms of guidance, US Steel reaffirmed its 2017 adjusted EPS outlook of $1.70. US Steel expects 2017 adjusted EBITDA to come in at $1.075 bln.
The company says its Q3 results were modestly better than the company had expected, with stable operating performance at each of its segments and its Tubular segment producing positive EBITDA in the quarter. X is seeing operating improvements in the assets in which it's investing.
In sum, if you'll recall, US Steel saw its share price tank in late April when it reported Q1 results. X had lowered its adjusted EBITDA guidance and analysts seemed puzzled that X would be lowering guidance so severely at a time when the steel industry is doing pretty well. The main reason for the decline was that X had accelerated some investments in improving and maintaining some steelmaking assets. This led to outages, downtimes and production curtailments. However, the Q2 and Q3 results are starting to show some of the benefits from that asset revitalization effort. Investors are clearly happy with the Q3 results.