Tuesday, January 26, 2010

Trade: Sold U.S. Steel

U.S. Steel (X) reported a dismal Q today. Revenue handily beat estimates ($3.4B vs $3.1B) yet earnings missed consensus numbers. All while competitors Nucor (NUE) and AK Steel (AKS) both easily beat number and reported profits. If that wasn't discouraging enough, X forecast that Q1 would be similar to Q4 while analysts (us too) expected a much improved number. Evidently input costs such as coking coal have increased much more then prices. This could be partially because of the demand in China. All in all, this tells us to stay with the Alpha Natural Resources (ANR) and the new pick in Puda Coal (PUDA). The coking coal companies seem able to benefit from the rising demand without the rising supply.

Key line from the report:
"We expect to report an overall first-quarter 2010 operating loss in line with the fourth-quarter 2009 as gradually improving business conditions are not yet fully reflected in our operating results," said Chairman and Chief Executive Officer John Surma.

Sold all shares in the Growth portfolio and personal accounts around $51 this morning.

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