US Steel (NYSE:X) is a about to release earnings. Ponder this Bear Case Scenario as you consider management comments. High fixed costs generate volatile operating leverage. When its good it’s really good. When its bad it’s really bad. Management is trying to cut costs but its a very big job. US Steel has exited the Serbian operation and is less exposed to European problems. Oil tubular products have been dumped by foreign competitors which is depressing margins and returns. Finally maintained coke production has absorbed a lot of capital and its hard to see the big returns.
George Gutowski writes from a caveat emptor perspective.