U.S. Steel Plunges as European Sales Damp Profit Outlook

(Bloomberg) -- U.S. Steel Corp. headed for its biggest loss this year after the manufacturer projected lower-than-expected profit as prices slip and costs rise faster than expected in Europe.

The company expects adjusted earnings before interest, taxes, depreciation and amortization of $225 million in the first quarter, U.S. Steel said on Wednesday after the close of regular trading in New York. That compares with a $395 million average of analysts’ forecasts compiled by Bloomberg.

U.S. Steel said on a conference call with analysts Thursday that its European business “is under a lot of pressure, and that’s a big change for us.” The outlook comes on top of U.S.-China trade tensions and slowing global economic growth that have fed concerns over demand prospects, which sent a gauge of steelmaker shares to its first annual loss in three years in 2018.

The report presented “a reasonably sobering” outlook, Phil Gibbs, an analyst at Keybanc Capital Markets, said in a note.

First-quarter EBITDA for the European business is expected to be lower than the same period in 2018 due to lower volumes, higher raw materials costs and an unfavorable euro exchange rate, the company said.

“For investors the main takeaway is a much weaker-than-expected guide,” Goldman Sachs Group Inc. analysts including Matthew Korn said in a note. “Partial details provided for the FY19 outlook indicate fewer shipments and higher capex than our current forecasts.”

The stock fell 3.5 percent at 10:17 a.m. in New York. A close at that price would mark the biggest decline since Dec. 24.

To contact the reporters on this story: Joe Richter in New York at jrichter1@bloomberg.net;Joe Deaux in New York at jdeaux@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Joe Richter, Joe Carroll

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