Zacks Analyst Blog Highlights: United States Steel, UBS AG, Credit Suisse Group, CIT Group and Cummins

CHICAGO--(BUSINESS WIRE)--Zacks.com Analyst Blog features: United States Steel Corp. (NYSE: X), UBS AG (NYSE: UBS), Credit Suisse Group (NYSE: CS), CIT Group Inc. (NYSE: CIT) and Cummins Inc. (NYSE: CMI).

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Here are highlights from tuesday’s Analyst Blog:

U.S. Steel Falls Far Short

The leading steel manufacturer in the U.S. and the fifth largest in the world, United States Steel Corp. (NYSE: X), delivered adjusted earnings per share (EPS) of 45 cents in its second quarter ended June 30, 2010, which fell short of the Zacks Consensus Estimate of 63 cents. EPS in the quarter was in stark contrast to the adjusted loss of $3.23 in the year-ago quarter. Revenues and shipments more than doubled, leading to the year-over-year improvement.

The EPS of 45 cents, however, excluded a foreign currency loss of 62 cents per share. More specifically, the loss was due to the impact of weakening of the euro against the U.S. dollar on the accounting remeasurement of a $1.4 billion U.S. dollar-denominated intercompany loan to a European subsidiary, partially offset by gains on euro-U.S. dollar derivatives activity.

Including the above, United Steel’s results came down to a loss of 17 cents per share, the sixth consecutive quarter that the company has reported a loss. The adjusted loss of $3.23 in the year ago quarter excluded a 39 cents foreign currency gain. Loss per share in the year ago quarter was $2.92 by netting of this gain.

United Steel’s revenues of $4.7 billion, however, outpaced the Zacks Consensus Estimate of $4.6 billion. On a year-over-year basis, revenues increased a whopping 120%. Shipments doubled compared with the year-ago quarter levels to 5.9 billion.

United Steel posted income from operations of $198 million, a reversal from a loss from operations of $465 million in the year-ago quarter helped by substantial growth in shipments and revenues.

UBS Profits, Outflows Fall

UBS AG (NYSE: UBS) has posted its third consecutive quarter of net profit aided by strong contribution from its Investment Bank division and a drop in client money outflows.

UBS AG reported a second quarter net profit of CHF 2.0 billion ($1.9 billion) compared with a profit of CHF 2.2 billion in the prior quarter and a loss of CHF 1.4 billion in the year-ago quarter. Operating income increased to CHF 9.2 billion from CHF 9.0 billion in the prior quarter and CHF 5.8 billion in the year-ago quarter.

Solid results at its Investment bank division were achieved partly due to the CHF 595 million gain from its own debt. Equities revenues and foreign exchange revenues were up in the quarter, though weak performance in the fixed income, currencies and commodities trading business was on the downside. Pre-tax profit increased to CHF 1.3 billion from CHF 1.2 billion in the prior quarter.

We are also encouraged to see the moderation of outflows in the quarter. UBS AG reported a decline in net new money outflows to CHF 4.7 billion from CHF 18.0 billion in the prior quarter.

Outlook

UBS AG gave a cautioned outlook. The company expects restrained client activity levels across it businesses as a result of the concerns hovering around market recovery and its sustainability. Volatility is anticipated to continue and the company projects its portfolio management fee income to fall from the second quarter levels on the back of reduced level of invested assets at the end of June.

Swiss Parliament Approval on Client Detail Sharing

Last month, the Swiss parliament voted in favor of the deal that would allow the sharing of banking data of 4,500 clients of UBS AG with the U.S. government. The clients are alleged to have evaded American taxes. Following this approval, the company expects to sort out all outstanding matters with the US government in connection with the US cross-border business by October this year.

Competitor

Last week, UBS AG’s rival, Credit Suisse Group (NYSE: CS) reported second quarter profit of CHF 1.6 billion, primarily due to tax and accounting gains. However, its investment banking results were not impressive.

Our Take

The global economic turmoil had a severe impact on the Swiss banking major’s balance sheet when the subprime crisis led to record losses. Additionally, the issues emanating from alleged tax evasion investigation and the dilution of Swiss banking secrecy significantly impacted UBS AG’s performance in the past several quarters, as worried clients looked for a safer refuge.

CIT Group Beats, Profit Soars

CIT Group Inc.’s (NYSE: CIT) second quarter earnings came in at 71 cents per share, substantially ahead of the Zacks Consensus Estimate of 30 cents. This also compares very favorably with prior quarter’s earnings of 49 cents.

Results for the quarter benefited primarily from higher non-spread revenue. Also, the quarter experienced gains on sales of assets and recoveries of charged-off receivables. However, higher operating expenses and increased provision for credit losses were the downside. CIT retained its strong liquidity and capital position during the quarter.

On a non-GAAP basis, total revenues for the reported quarter came in at $751.2 million, up 27.7% from $588.1 million in the prior quarter. Revenues also surpassed the Zacks Consensus Estimate of $645.0 million. Better-than-expected revenues were primarily aided by higher gains on loan and portfolio sales and recoveries of charged-off receivables.

Cummins Profit More than Fourfold

Cummins Inc. (NYSE: CMI) witnessed more than fourfold increase in profit to $246 million or $1.25 per share in the second quarter of the year from $56 million or 28 cents per share in the same quarter a year ago. The company also significantly outpaced the Zacks Consensus Estimate of 89 cents per share during the quarter.

The company’s results were backed by enhanced productivity and strong sales gains in its international markets. Sales in the non-U.S. markets, which accounted for 64% of the company’s revenue in the quarter, shot up 51% from the prior year.

Revenues in the quarter soared 32% to $3.21 billion, driven mainly by impressive sales gains in the company’s Engine and Components segments. It was higher than the Zacks Consensus Estimate of $2.85 billion.

Operating income more than tripled to $396 million from $121 million a year ago. Earnings before interest and taxes (EBIT) increased to $401 million or 12.5% of sales from $109 million or 4.5% of sales a year ago.

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