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ArcelorMittal's (MT) Q3 Earnings Top Estimates, Sales Lag

ArcelorMittal MT recorded profits of $4,621 million or $4.17 per share in the third quarter of 2021 against a loss of $261 million or 21 cents in the year-ago quarter.

Barring one-time items, earnings were $4.27 a share, topping the Zacks Consensus Estimate of $4.17. The steel giant benefited from a strong pricing environment in the third quarter that led to the highest net income and lowest net debt since 2008.

Total sales increased around 52% year over year to $20,229 million in the quarter. However, the figure missed the Zacks Consensus Estimate of $22,439.5 million. Sales were driven by a significant rise in average steel selling prices as well as higher iron ore prices.

Total steel shipments fell roughly 17% year over year at 14.6 million metric tons in the reported quarter. Shipments also fell 9% sequentially, hurt by weaker demand in automotive as well as production constraints and order shipment delays. Average steel selling prices were up around 76% year over year.

ArcelorMittal Price, Consensus and EPS Surprise

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

Segment Review

NAFTA: Sales rose roughly 3% year over year to $3.4 billion in the reported quarter. Crude steel production declined roughly 55% year over year to 2 million metric tons. Steel shipments fell around 49% year over year to 2.3 million metric tons. Average steel selling price increased around 86% year over year to $1,303 per ton.

Brazil: Sales increased around 122% year over year to $3.6 billion. Crude steel production rose roughly 35% year over year to 3.1 million metric tons. Shipments increased around 17% year over year to 2.8 million metric tons. Average steel selling price went up roughly 91% year over year to $1,196 per ton.

Europe: Sales increased around 60% year over year to $11.2 billion. Crude steel production rose roughly 15% year over year to 9.1 million metric tons in the reported quarter. Shipments fell around 8% year over year to 7.6 million metric tons. Average steel selling price went up roughly 69% year over year to $1,098 per ton.

ACIS: Sales rose around 67% year over year to $2.4 billion. Crude steel production totaled 3 million metric tons, up roughly 18% year over year. Shipments declined around 5% year over year to roughly 2.4 million metric tons. Average selling prices went up around 86% year over year to $864 per ton.

Mining: Sales climbed around 61% year over year to around $1.2 billion. Iron ore production totaled 6.8 million metric tons, down around 6% from the year-ago quarter’s levels. Iron ore shipments fell roughly 4% year over year to 6.9 million metric tons.

Financials

At the end of the third quarter, ArcelorMittal had cash and cash equivalents of around $4.4 billion, down around 33% year over year. The company’s long-term debt was $6.5 billion, down roughly 32% on a year-over-year basis.

Net cash from operating activities was $2.4 billion for the reported quarter. Free cash flow was $1.6 billion for the quarter. Net debt fell to $3.9 billion from $5 billion at the end of the second quarter of 2021, driven by free cash flows.

As of Sep 30, 2021, ArcelorMittal repurchased shares worth $1.4 billion out of the total $2.2 billion share buyback program that was announced in July 2021. It has added $1 billion to its share buyback program based on strong cash flows in the third quarter.

Outlook

ArcelorMittal expects global apparent steel consumption (“ASC”), excluding China, to increase 12-13% in 2021.

Factoring in softening real demand in China, ArcelorMittal now envisions a modest contraction in apparent steel demand in China in 2021. The company also expects that the impact on ex-China steel markets will be limited as strict production constraints are likely to lead to lower Chinese net exports in the second half of 2021 as compared to the first half.

Price Performance

Shares of ArcelorMittal have surged 101.2% in a year compared with a 63.2% rise of the industry.

 

Image Source: Zacks Investment Research

Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space include Nutrien Ltd. NTR, Steel Dynamics, Inc. STLD and Dow Inc. DOW, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Nutrien has an expected earnings growth rate of 212.2% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 13.5% upward over the last 60 days.

Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It has a trailing four-quarter earnings surprise of roughly 73.5%, on average. NTR has gained around 62% in a year.

Steel Dynamics has a projected earnings growth rate of 477.5% for the current year. The consensus estimate for the current year has been revised 15.5% upward over the past 60 days.

Steel Dynamics beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 5.1%. STLD has rallied around 91% in a year.

Dow has a projected earnings growth rate of 447% for the current year. The consensus estimate for the current year has been revised 8.7% upward over the last 60 days.

Dow beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 14.1%. The stock has gained around 15% in a year.


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