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Need To Know: Analysts Just Made A Substantial Cut To Their ArcelorMittal (AMS:MT) Estimates

Simply Wall St
·3-min read

Today is shaping up negative for ArcelorMittal (AMS:MT) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the consensus from 19 analysts covering ArcelorMittal is for revenues of US$54b in 2020, implying a substantial 24% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 31% to US$1.67. However, before this estimates update, the consensus had been expecting revenues of US$63b and US$0.54 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for ArcelorMittal

ENXTAM:MT Past and Future Earnings May 8th 2020
ENXTAM:MT Past and Future Earnings May 8th 2020

The consensus price target was broadly unchanged at US$14.69, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic ArcelorMittal analyst has a price target of US$21.27 per share, while the most pessimistic values it at US$3.70. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 24%, a significant reduction from annual growth of 1.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 2.5% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - ArcelorMittal is expected to lag the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at ArcelorMittal. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of ArcelorMittal.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for ArcelorMittal going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.