U.S. Steel Corp.’s stock plunged on heavy volume to its biggest one-day decline since it went public 26 years ago, after the steelmaker stunned investors by reporting a large first-quarter loss.
The company reported late Tuesday a first-quarter adjusted per-share loss of 83 cents, roughly just one-third the loss it suffered a year ago, but analysts surveyed by FactSet were expecting an adjusted profit of 35 cents. U.S. Steel also halved its 2017 profit outlook.
tumbled 27% to $22.78, enough to make it the biggest percentage decliner listed on the New York Stock Exchange. It was the most actively traded on the major U.S. exchanges, with volume spiking to 101 million shares, which was more than five-time the full-day average of about 19 million shares.
The previous biggest one-day decline was 18% on Oct. 15, 2008, in the midst of the Great Recession. In the company’s current form, the stock began trading on April 12, 1991. It has closed as high as $191.96 on June 25, 2008 and as low as $6.67 on Jan. 27, 2016.
The stock closed at the lowest level seen since the Nov. 8 election. At one point, the stock had nearly doubled after the election to a 2 1/2-year closing high of $41.57 on Feb. 21, amid optimism over President Donald Trump’s tough talk on trade and promises to boost infrastructure spending.
“Given the recent report and revised guidance, we remain concerned that the company’s high fixed costs, amplified by weak volumes and pricing, will continue to keep earnings under pressure [and] in the red,” wrote analyst Aldo Mazzaferro at Macquarie Research, in a note to clients. Two days earlier, Mazzaferro had upgraded U.S. Steel to neutral from underperform.
Pennsylvania steel town struggles
For decades, Monessen, Pa., had a thriving steel industry that employed thousands of people. That all changed when the mill shut down in 1987. “Walk down the street today,” says retired steelworker John Golomb, “and all you see is total heartbreak.” Video/Photo: Robert Libetti/The Wall Street Journal
Investors may have overestimated the potential boost from Trump’s policy promises. If additional import restrictions and tariffs are imposed, credit rating agency Fitch Ratings said Wednesday that the benefit to U.S. steelmakers would likely only be temporary, and would end up hurting heavy equipment and auto manufacturers.
“Fitch expects domestic integrated steel producers to use cash flow during this period of improved profitability to repair damage inflicted on balance sheets during the global financial crisis as well as to invest in improved productivity and cost reduction,” Fitch analyst Monica Bonar wrote in a research note. “Investment in new integrated steel production in North America is not expected given the price tags in the billions and mature domestic markets.”