U.S. Steel: The Trend Is Right

If you take all the ingredients in U.S. Steel 's (NYSE: X) first-quarter results and mix them in a blender, you actually get a fairly tasty investment concoction. But you'd better rise early to begin preparing your blend, since the quarter had quite a number of items for inclusion.

For the March period, the company earned $235 million, or $1.98 a share, down from $273 million, or $2.30 a share, for the first quarter of 2007. Those earnings, while appearing to shrink, actually beat the expectations of the dart throwers, who had been looking for about $1.83 on the per-share line. Revenues, an important addition to your mixture, actually rose 38% to a record $5.2 billion, from $3.8 billion a year earlier.

The strong top line was the result of a robust flat-rolled business in North America, along with recent strong performance out of the European segment. Those areas of strength ran counter to the company's tubular business, which declined from the prior period. At Alcoa (NYSE: AA), very much like U.S. Steel, while earnings slipped, the direction -- including pricing and overseas demand -- appears positive.

The key to the company going forward can probably be found in CEO John Surma's statement that results for the current quarter will likely represent a substantial improvement. His statement was based on the expectation that higher prices for the quarter will exceed increasing levies for raw materials, including scrap.

So while the past quarter was disappointing on a year-over-year basis, the trend is good: The results exceeded those of the final quarter of 2007, and, according to Surma, we'll like the June numbers even better. That sort of direction, especially amid the current whacko market, is easy to accept.