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ArcelorMittal (MT) Q3 Earnings Top, Sales Miss Estimates

Zacks

Steel giant ArcelorMittal MT logged net income of $1,205 million or $1.18 per share in third-quarter 2017, up from net earnings of $680 million or 67 cents recorded a year ago. Earnings per share topped the Zacks Consensus Estimate of 86 cents.

Revenues went up 21.5% year over year to $17,639 million in the quarter on the back of higher average steel selling prices, higher steel shipments, higher market-priced iron ore shipments and higher seaborne iron ore prices. Sales however, trailed the Zacks Consensus Estimate of $17,895 million.

Total steel shipments rose 6.8% to 21.7 million metric tons in the reported quarter from 20.3 million recorded a year ago. Average steel selling prices went up 14.8% year over year.

ArcelorMittal Price, Consensus and EPS Surprise


ArcelorMittal Price, Consensus and EPS Surprise | ArcelorMittal Quote

Segment Review

NAFTA: Crude steel production rose 4.8% year over year to 5,904 million metric tons in the third quarter. Steel shipments rose 5.4% year over year to 5,655 million metric tons. Sales rose 8.6% year over year to $4,636 million. Average steel selling price rose 3.6% year over year to $741 per ton.

Brazil: Crude steel production went down 3.2% year over year to 2,797 million metric tons. Shipments went up roughly 6.9% year over year to 2,940 million metric tons. Sales increased 19.1% year over year to $2,059 million. Average steel selling price rose 11.9% year over year to $651 per ton.

Europe: Crude steel production rose roughly 6.4% year over year to 11,248 million metric tons in the reported quarter. Shipments rose 7.8% year over year to 10,116 million metric tons. Sales increased about 28.2% year over year to $9,196 million while average steel selling price rose 21.3% year over year to $723 per ton.

Asia Africa and CIS (ACIS): Sales rose 22.4% year over year to $ 1,941 million. Crude steel production came in at 3,669 million metric tons, up 3.3% year over year. Average selling prices increased 22.9% year over year to $515 per ton.

Mining: Iron ore production increased 3.6% year over year to 14.2 million metric tons. Coal production fell year over year to 1.5 million metric tons from 1.6 million metric tons recorded a year ago. Revenues went up 27.2% year over year to $ 1,029 million.

Balance Sheet

As of Sep 30, 2017, cash and cash equivalents were at $3 billion, up from $2.3 billion recorded a year ago.

The company’s long-term debt was around $9,185 million as of Sep 30, 2017, down 27.3% year over year.

Net cash provided by operating activities was $763 million in the reported quarter, down 12.9% from $876 million a year ago.

Guidance

According to ArcelorMittal, market conditions are favorable and demand environment remains positive along with healthy steel spreads. The company continues to expect global apparent steel consumption (ASC) to grow in the range of 2.5-3% for 2017.

In the United States, the company sees apparent steel consumption growth of 2-3% in 2017, factoring in higher construction and machinery demand, offset by lower production in the automotive. The company also anticipates 0.5-1.5% growth in apparent steel consumption in Europe. Moreover, apparent steel consumption is forecasted to rise 2-3% in Brazil as sustained weakness in construction is partly offset by modest improvement in consumer confidence and automotive demand. Apparent steel consumption in China is expected to grow 2.5-3.5% for 2017, owing to strength in automotive and machinery.

The company expects capital expenditure to be around $2.9 billion in 2017. Cash needs of the business are expected to be around $4.6 billion in 2017.

Price Performance

ArcelorMittal’s shares have moved up 13.8% in the past three months outperforming the industry’s 3.3% growth.



Zacks Rank & Stocks to Consider

ArcelorMittal currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Sociedad Quimica y Minera S.A. SQM, POSCO PKX and Westlake Chemical Corporation WLK. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Sociedad Quimica has an expected long-term earnings growth rate of 32.5%.

POSCO has an expected long-term earnings growth rate of 5%.

Westlake Chemical has an expected long-term earnings growth rate of 8.4%.

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