ArcelorMittal (MT) Q4 Earnings Beat Estimates, Sales Miss

Steel giant, ArcelorMittal MT logged net income of $1,039 million or $1.02 per share in fourth-quarter 2017, up from $403 million or 40 cents a year ago. 

 

The company’s adjusted earnings came in at 90 cents per share that beat the Zacks Consensus Estimate of 80 cents.

 

Revenues went up 25.4% year over year to $17,710 million in the quarter on the back of increased steel shipments, higher average steel selling prices and higher market-priced iron ore shipments partly offset by reduced seaborne iron ore reference prices. Sales however, missed the Zacks Consensus Estimate of $18,340 million.

 

Total steel shipments rose 5% to 21 million metric tons in the reported quarter from 20 million recorded a year ago. Average steel selling prices went up 20.4% year over year.

 

FY17 Results

 

For 2017, the company posted profits of $4.6 billion or $4.48 per share, compared with $1.8 billion or $1.87 per share a year ago. Additionally, the company reported revenues of $68.7 billion, up around 21% from $56.8 billion reported in 2016.

ArcelorMittal Price, Consensus and EPS Surprise

ArcelorMittal Price, Consensus and EPS Surprise | ArcelorMittal Quote

Segment Review

 

NAFTA: Crude steel production increased 7.7% year over year to 5.6 million metric tons in the fourth quarter. Steel shipments went up 2.8% year over year to 5.2 million metric tons. Sales increased 7.3% year over year to $4,296 million. Average steel selling price rose 9.8% year over year to $748 per ton.

 

Brazil: Crude steel production rose 7.6% year over year to 3 million metric tons. Shipments went up roughly 3.8% year over year to 3.1 million metric tons. Sales increased 7.4% year over year to $2,252 million. Average steel selling price rose 21.2% year over year to $685 per ton.

 

Europe: Crude steel production increased roughly 1.3% year over year to 10.3 million metric tons in the reported quarter. Shipments rose 6.5% year over year to 10.2 million metric tons. Sales increased about 34.6% year over year to $9,610 million while average steel selling price rose 24.7% year over year to $736 per ton.

 

Asia Africa and CIS (ACIS): Sales rose 33.6% year over year to $2,039 million. Crude steel production came in at 3.8 million metric tons, up 5.1% year over year. Average selling prices increased 26.4% year over year to $546 per ton.

 

Mining: Iron ore production increased 3.6% year over year to 14.4 million metric tons. Coal production fell year over year to 1.5 million metric tons from 1.8 million metric tons recorded a year ago. Revenues went up 7% year over year to $ 959 million.

 

Balance Sheet

 

As of Dec 31, 2017, cash and cash equivalents were at $2.8 billion, up from $2.6 billion recorded a year ago.

 

The company’s long-term debt was around $10,143 million as of Dec 31, 2017, down 14% year over year.  

 

Net cash provided by operating activities was $2,885 million in the reported quarter, down 74.5% from $1,653 million a year ago.

 

Guidance

 

According to ArcelorMittal, market conditions are favorable and demand environment remains positive along with healthy steel spreads. The company expects global apparent steel consumption (ASC) to grow in the range of 1.5-2.5% in 2018.

 

In the United States, the company sees apparent steel consumption growth of 1.5-2.5% in 2018, factoring in higher construction and machinery demand. The company also anticipates 1-2% growth in apparent steel consumption in Europe. Moreover, apparent steel consumption is forecast to rise 6.5-7.5% in Brazil as the economy is expected to turnaround with improved consumer confidence as construction recovers. Apparent steel consumption in China increased 3.5% in 2017 and is expected to remain close to this level this year as weakness in the real estate sector to be partly offset by strong infrastructure and automotive end markets.

 

The company expects capital expenditure to be around $3.8 billion in 2018. Cash needs of the business are expected to be around $5.6 billion in 2018.

 

Price Performance

 

ArcelorMittal’s shares have moved up 50.1% over a year, outperforming the industry’s 29.9% growth.

 

 

Zacks Rank & Other Stocks to Consider

 

ArcelorMittal carries a Zacks Rank #1 (Strong Buy).

 

Some other stocks worth considering from the basic materials space are Air Products and Chemicals Inc. APD, Huntsman Corporation HUN and BASF SE BASFY.

 

Air Products has an expected long-term earnings growth of 14.06% and a Zacks Rank #1. Its shares have rallied 20.9% over a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Huntsman has an expected long-term earnings growth of 8% and a Zacks Rank #2. Its shares have rallied 67.9% in a year.

 

BASF has an expected long-term earnings growth of 8.7% and a Zacks Rank #2. Its shares have gained 21.3% over a year.

 

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