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ArcelorMittal (MT) Q2 Earnings Rise Y/Y, Sales Top Estimates

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ArcelorMittal’s (MT - Free Report) profits rose in second-quarter 2018, supported by a spike in steel prices. The company recorded net income of $1,865 million or $1.83 per share, up from $1,322 million or $1.29 in the year-ago quarter.

Revenues went up roughly 16% year over year to $19,998 million in the quarter on the back of higher average steel selling prices, market-priced iron ore shipments, seaborne iron ore reference prices and steel shipments. The figure surpassed the Zacks Consensus Estimate of $19,877 million.

Average steel selling prices went up around 15.2% year over year in the quarter to $728 per ton. Total steel shipments rose roughly 1.2% to 21.8 million metric tons from 21.5 million metric tons a year ago, supported by higher steel shipments across NAFTA and Brazil along with marginally higher shipments in Europe. These were partly offset by lower shipments in ACIS due to unplanned maintenance.

ArcelorMittal Price, Consensus and EPS Surprise

ArcelorMittal Price, Consensus and EPS Surprise | ArcelorMittal Quote

Segment Review

NAFTA: Crude steel production rose around 3.2% year over year to 5.9 million metric tons. Steel shipments increased 7.1% year over year to 5.8 million metric tons. Sales increased roughly 16.3% year over year to $5.4 billion. Average steel selling price rose 12.2% year over year to $853 per ton.

Brazil: Crude steel production rose roughly 14.7% year over year to 3.1 million metric tons. Shipments went up roughly 8% year over year to 2.8 million metric tons. Sales increased 19.5% year over year to $2.2 billion. Average steel selling price rose roughly 11.1% year over year to $728 per ton.

Europe: Crude steel production was essentially flat year over year at 11 million metric tons in the quarter. Shipments rose year over year to 10.52 million metric tons from 10.47 million metric tons. Sales increased about 14.7% year over year to $10.5 billion and average steel selling price rose 14.6% year over year to $800 per ton.

Asia Africa and CIS (ACIS): Sales rose around 16.1% year over year to $2.1 billion. Crude steel production totaled 3.09 million metric tons, down around 16.2% year over year. Shipments fell around 6.1% year over year to 3.06 million metric tons. Average selling prices increased roughly 24.4% year over year to $621 per ton.

Mining: Iron ore production totaled 14.5 million metric tons, down from 14.7 million metric tons in the year-ago quarter. Coal production totaled 1.6 million metric tons, flat year over year. Revenues were up 4.9% year over year to $1.07 billion.

ArcelorMittal ended the quarter with cash and cash equivalents of roughly $3.1 billion, up around 34.8% year over year. The company’s long-term debt was around $8.96 billion, down roughly 12.3% year over year.

Net cash provided by operating activities was $1,232 million in the reported quarter versus net cash provided in operating activities of $1,214 million a year ago.

Per ArcelorMittal, market conditions are favorable and demand environment continues to be positive along with healthy steel spreads. The company now expects global apparent steel consumption (ASC) to grow in the range of 2-3% in 2018, up from the previous growth expectation of 1.5-2.5%.

In the United States, the company projects apparent steel consumption growth of 2-3% in 2018 (up from 1.5-2.5% expected earlier), factoring in higher construction and machinery demand. The company also anticipates 2-3% growth in apparent steel consumption in Europe, up from 1-2% expected earlier, supported by strength across construction and machinery end-use markets.

Apparent steel consumption is expected to rise 5.5-6.5% in Brazil compared with the earlier expectation of 6.5%-7.5% to highlight the impacts of the nationwide truck strike and cautious outlook ahead of the elections.

Apparent steel consumption in China is expected to increase 1-2% (up from -0.5% to 0.5%) in 2018, driven by consistent improvement in real estate demand, ongoing strong machinery and automotive demand, partly offset by slowdown in infrastructure.

The company expects capital expenditure to be $3.7 billion in 2018, down from $3.8 billion expected earlier. Cash needs of the business are expected to be around $5.8 billion in 2018, up from the previous estimate of $5.6 billion.

Price Performance

ArcelorMittal’s shares have gained 27.8% over the past three months compared with 18.8% rise of the industry.

Zacks Rank & Other Stocks to Consider

ArcelorMittal currently sports a Zacks Rank #1 (Strong Buy).

A few other top-ranked stocks in the basic materials space are KMG Chemicals, Inc. , Ingevity Corp. (NGVT - Free Report) and Celanese Corp. (CE - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

KMG Chemicals has an expected long-term earnings growth rate of 28.5%. Its shares have returned 43.7% in a year.

Ingevity has an expected long-term earnings growth rate of 12%. Its shares have rallied 66.6% in a year.

Celanese has an expected long-term earnings growth rate of 10%. Its shares have gained 21.1% in a year.

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