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ArcelorMittal's (MT) Q1 Earnings Miss, Sales Top Estimates

Zacks Equity Research

ArcelorMittal MT recorded lower profits in first-quarter 2019. The company generated net income of $414 million or 41 cents per share, down from $1,192 million or $1.17 in the year-ago quarter. The results were impacted by higher raw material costs and lower steel prices.

Barring one-time items, adjusted earnings per share (EPS) came in at 53 cents, which missed the Zacks Consensus Estimate of 88 cents.

Total sales rose modestly to $19,188 million in the quarter from $19,186 million in the year-ago quarter. The figure beat the Zacks Consensus Estimate of $18,825 million.

Total steel shipments rose to 21.8 million metric tons from 21.3 million in the year-ago quarter. The upside can be attributed to higher steel shipments in Europe, partly offset by lower steel shipments in ACIS and NAFTA. Average steel selling prices fell 3.1% year over year in the quarter.

ArcelorMittal Price, Consensus and EPS Surprise

 

ArcelorMittal Price, Consensus and EPS Surprise

ArcelorMittal price-consensus-eps-surprise-chart | ArcelorMittal Quote

 

Segment Review

NAFTA: Crude steel production fell around 8.1% year over year to 5.4 million metric tons. Steel shipments fell 4.3% year over year to 5.3 million metric tons. Sales increased roughly 7% year over year to roughly $5.1 billion. Average steel selling price rose 12.2% year over year to $874 per ton.

Brazil: Crude steel production rose roughly 7.6% year over year to 3 million metric tons. Shipments rose around 16% year over year to 2.9 million metric tons. Sales increased 8.5% year over year to $2.2 billion. Average steel selling price fell roughly 6.4% year over year to $704 per ton.

Europe: Crude steel production rose 10% year over year to 12.4 million metric tons in the reported quarter. Shipments rose 8% year over year to roughly 11.6 million metric tons. Sales fell around 1.4% year over year to $10.5 billion, while average steel selling price fell 9% year over year to $729 per ton.

Asia Africa and CIS (ACIS): Sales fell around 20.9% year over year to $1.6 billion. Crude steel production totaled roughly 3.3 million metric tons, down around 2.3% year over year. Shipments fell around 12.1% year over year to 2.7 million metric tons. Average selling prices declined roughly 11.3% year over year to $541 per ton.

Mining: Iron ore production totaled 14.1 million metric tons, down from 14.6 million metric tons a year ago. Coal production totaled 1.2 million metric tons, down from 1.5 million metric tons a year ago. Sales were up 10.1% year over year to $1.1 billion.

Financials

As of Mar 31, 2019, ArcelorMittal had cash and cash equivalents of roughly $2.2 billion, down from $2.3 billion a year ago. The company’s long-term debt was around $10.6 billion, up roughly 13.8% year over year.

Net cash from operating activities amounted to $971 million compared with $160 million in the year-ago quarter.

Outlook
 
In 2019, ArcelorMittal anticipates global apparent steel consumption (ASC) growth in the range of 1-1.5%, up from 0.5-1% growth expected earlier.

In the United States, the company projects ASC growth of 0.5-1.5% in 2019, unchanged from prior view. This is expected to be driven by persistent growth in non-residential construction and machinery.  

In Europe, weak manufacturing and falling automotive production are expected to weigh on ASC growth. These factors are expected to contract ASC up to 1% in 2019, against rise of up to 1% expected earlier.

In Brazil, ASC is expected to rise 3-4%, down from 3.5-4.5% increase expected earlier. The downside is likely to stemming from weaker-than-expected economic growth early in 2019.

In China, the company expects overall demand to grow flat to 1% in 2019, up from a decline of -0.5% to -1.5% expected earlier. Real estate demand along with economic stimulus is expected to drive the upside.  

The company expects to witness higher steel shipments in 2019 on year-over-year basis. Capital expenditure for the year is expected to increase to $4.3 billion from $3.3 billion in 2018.  

Price Performance

ArcelorMittal’s shares have lost 46.5% in the past year compared with 33.6% decline of the industry.



Zacks Rank & Key Picks

ArcelorMittal currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the basic materials space are Materion Corporation MTRN, Verso Corporation VRS and AngloGold Ashanti Limited AU, all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Materion has an expected earnings growth rate of 16.4% for 2019. The company’s shares have gained 25% in the past year.

Verso has an expected earnings growth rate of 7% for the current year. The company’s shares have appreciated 17.1% in a year’s time.

AngloGold has an expected earnings growth rate of 86.8% for 2019. Its shares have rallied 30.7% in a year’s time.

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