U.S. Steel Surges After Assuaging Fears on Spending and Profit

(Bloomberg) -- Investors breathed a sigh of relief after U.S. Steel Corp. executives soothed concerns about the company’s new spending plans and a volatile steel market, sending the shares higher.

A day after reporting first-quarter earnings that beat estimates, executives said on a conference call second-quarter Ebitda will be about the same as the first three months of 2019. The Pittsburgh-based company also said the biggest capital expenditures for a new project would be pushed out to 2020 and 2021.

“They beat on the quarter -- some people were expecting a miss -- they guided to flat Ebitda sequentially, which is maybe better than feared,” Credit Suisse analyst Curt Woodworth said Friday in a telephone interview after the call. “It’s a function of catalysts, so I think that a lot of the negative catalysts played out already -- like the capex thing, steel pricing collapsing -- estimates have been low for this company.”

U.S. Steel surged as much as 13 percent in New York Friday, the biggest gain since Feb. 16, and the shares were trading up 11 percent at 10:06 a.m. The company reported adjusted earnings of 47 cents a share, beating analysts’ average estimate of 19 cents, while posting sales of $3.5 billion, about 5.2 percent higher than expected.

The company said on Thursday it plans to invest more than $1 billion at two of its Pennsylvania plants to help alleviate two key complaints against the once-storied company: it had under-invested until recently in its facilities and done too little to mitigate its emissions.

Most of that new spending won’t come until next year and the year after, executives said on the earnings call. Executives also said that analysts should model for declining steel prices to impact the business, but added it will take the necessary steps to try to offset that decline by trying to sell more higher-margin products.

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