Shares of United States Steel Corp. rallied Wednesday to buck the broader trend among steel stocks, after the company swung to a profit in the second quarter from a massive first-quarter loss.
The earnings seemed to offset comments from President Donald Trump on Tuesday that signaled a possible change of heart on a plan to impose additional tariffs and restrictions on cheap steel imports.
In an interview with The Wall Street Journal, Trump said “we don’t want to do it at this moment.”
Commerce Secretary Wilbur Ross has been working on a seldom-used Section 232 investigation to determine whether steel imports are harming U.S. national security. Ross had intended to complete the report by the end of June, but the effort was braked because of objections from trading partners and some of Trump’s aides.
Trump told the paper the issue was still on the table, and reiterated his view that dumping is “a very unfair situation.” But he said a final decision may have to wait until other stalled initiatives, including health-care reform and tax reform and even infrastructure, are completed. Read the WSJ interview here.
The comments sent other steel stocks into a downward spiral. AK Steel Holding Corp.
shares slid 8%, Nucor Corp. shares
tumbled 4% and ArcelorMittal Mittal SA ADRs
were down 2%.
U.S. Steel shares
meanwhile, soared 7%, a vastly different move to the one seen after the company shocked investors in April with an unexpected first-quarter loss. That news sent the stock to its biggest one-day decline since it went public 26 years ago, as MarketWatch’s Tomi Kilgore reported.
Since then, the company has replaced Chief Executive Mario Longhi with David Burritt, who was chief operating officer The company named Kevin Bradley as chief financial officer on Wednesday, bringing him in from the same role at crane maker Terex Corp.
Under Burrit’s leadership, the company posted net income of $261 million for the second quarter, or $1.48 a share, after a loss of $180 million, or $1.03 a share, in the year-earlier period.
Sales rose to $3.14 billion from $2.73 billion. Analysts surveyed by FactSet were expecting earnings of 36 cents a share on revenue of $2.98 billion. U.S. Steel expects full-year earnings of $1.70 a share, while analysts estimate earnings of 84 cents a share.
J.P. Morgan analyst Michael Gambardella said the beat was driven by flat rolled realized prices and costs. Flat steel products are used in the automotive, domestic appliance, shipbuilding and construction industries.
“Costs were lower due to the benefits from the restart of the Keetac facility and typical seasonal improvements in the mining operations,” he wrote in a note ahead of the company’s earnings call. “Tubular posted a smaller than expected loss with higher shipments and average selling prices as well as lower costs.”
Gambardella said he expected Section 232 to be a key topic on the Wednesday earnings call.
CEO Burritt said he was confident the Trump administration ‘would come to the right conclusion.”
“In order to have a strong U.S. manufacturing base, we must have a strong steel industry,” he told analysts. “ So goes our manufacturing base, so goes our country and we firmly believe that this administration understand the importance U.S. deal to this country.”
U.S. Steel shares have fallen 39% in 2017, while the S&P 500
has gained 11%.