07/31/2012 01:07 EDT | Updated 09/30/2012 05:12 EDT

US Steel 2nd-qtr net income cut in half, but beats Wall Street expectations, shares rise

Shares of U.S. Steel jumped 9 per cent Tuesday after the manufacturer exceeded Wall Street's expectations for the second quarter by raising some prices and selling more steel to energy companies.

U.S. Steel Corp. also said it expects each of its business segments to manage an operating profit in the third quarter, although overall results should decline from the second quarter.

Net income still fell by half in the three month ended in June because of challenging economic conditions. The Pittsburgh company earned $101 million, or 62 cents per share. That's down 54.5 per cent from net income of $222 million, or $1.33 a share, a year ago. Revenue fell 2 per cent to $5.02 billion.

Excluding an $11 million after-tax gain on early redemption of senior notes, U.S. Steel reported adjusted net income of $112 million, or 69 cents per share.

Analysts predicted net income of 48 cents per share on revenue of $5 billion, according to FactSet. Such estimates typically exclude one-time times.

Typically, the second quarter is the strongest for the industry. But steel manufacturers have turned in weaker second-quarter performances as a number of key customers reduced demand, including the construction industry. The economies of the U.S., China and some emerging countries slowed, while Europe's economy remained fragile with some countries in recession.

Nucor Corp., AK Steel Holding Corp. and ArcelorMittal all reported weaker earnings from April through June, blaming anemic demand.

U.S. Steel fared somewhat better because it sells more steel under contract to makers of automobiles, appliances and other products, Nomura Securities International analyst Curt Woodworth said.

Demand has been stronger in those markets and the contracts helped U.S. Steel keep prices more stable, Woodworth said.

In addition, U.S. Steel sold more pipes and other products to energy companies during the quarter. And its European operations were profitable for the first time since the second quarter of 2010.

For the quarter, U.S. Steel's overall shipments declined 1 per cent from a year ago and were off 4.1 per cent from the first quarter. The company blamed an increase in flat-rolled steel imports. Average prices increased for flat-rolled steel but fell slightly for tubular products. Overall operating expenses fell 1 per cent from a year ago.

"The global economic recovery continues to be slow and unsteady and we have focused on finding ways to make money in the economy we have today," John P. Surma, chairman and CEO, told analysts during a conference call.

Separately, the company is in negotiations with the United Steelworkers on a new contract. Officials said they anticipate reaching an agreement without a work stoppage. The current pact expires Sept. 1.

Shares of U.S. Steel rose $1.73, or 9.1 per cent, to end at $20.65. That was the biggest percentage gain since June 19. The price has ranged from $17.67 to $39.73 in the past 52 weeks.


AP Business Writer Samantha Bomkamp contributed to this report.