ArcelorMittal's (MT) Stock Up on Q3 Earnings & Revenue Beat

ArcelorMittal MT shares rose around 3% last Thursday, after the company reported better-than-expected third-quarter 2020 results. The top and the bottom line surpassed the respective Zacks Consensus Estimate.

Earnings & Revenue Discussion

The company reported a net loss of $261 million or 21 cents per share in the third quarter, narrower than a loss of $539 million or 53 cents in the year-ago quarter.

Barring one-time items, adjusted loss per share was 15 cents that was narrower than the Zacks Consensus Estimate of a loss of 19 cents.

Total sales fell 20.3% year over year to $13,266 million in the quarter. However, the figure beat the Zacks Consensus Estimate of $12,320 million. Sales were hurt by lower steel shipments and reduced average steel selling prices.

Total steel shipments fell 13.5% year over year to 17.5 million metric tons. Average steel selling prices were down 8.4% year over year.

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 21.7% year over year to 4.4 million metric tons in the reported quarter. Steel shipments fell 13.6% year over year to 4.4 million metric tons. Sales fell 24.3% year over year to $3.3 billion. Average steel selling price declined 11.5% year over year to $701 per ton.

Brazil: Crude steel production fell 13.8% year over year to 2.3 million metric tons. Shipments fell 13.7% year over year to 2.4 million metric tons. Sales declined 16.9% year over year to $1.6 billion. Average steel selling price fell 7.5% year over year to $625 per ton.

Europe: Crude steel production fell 24.2% year over year to 7.9 million metric tons in the reported quarter. Shipments fell 15.6% year over year to 8.2 million metric tons. Sales declined 20.3% year over year to $7 billion, while average steel selling price dropped 5.1% year over year to $651 per ton.

Asia Africa and CIS (ACIS): Sales fell 15.4% year over year to $1.4 billion. Crude steel production totaled 2.5 million metric tons, down 26.3% year over year. Shipments fell 8.1% year over year to around 2.5 million metric tons. Average selling prices declined 12.6% year over year to $465 per ton.

Mining: Iron ore production totaled 14.8 million metric tons, up from 13.6 million metric tons in the year-ago quarter. Coal production totaled 1.2 million metric tons, down from 1.4 million metric tons in the prior-year quarter. Sales rose 1.5% year over year to $1,200 million.

Financials

At the end of the third quarter, ArcelorMittal had cash and cash equivalents of around $6.6 billion, up from $5.7 billion in the second quarter. The company’s long-term debt was $9.6 billion, down 7.7% on a sequential-comparison basis.

Net cash from operating activities surged 486.1% sequentially to $1,770 million in the third quarter.

Outlook

ArcelorMittal stated that it is witnessing improvement in activity levels due to the easing of lockdown measures. However, demand is below normal and the pace of recovery continues to be uncertain. The company is also restarting hot-idled capacity as market demand improves. It is also maintaining flexibility to quickly adapt production as situation evolves. ArcelorMittal is also focusing on cost reduction initiatives to support profitability amid evolving demand. It will increase production as economic activity recovers.

Price Performance

ArcelorMittal’s shares have lost 13.6% in the past year compared with 2.6% decline of the industry.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are Agnico Eagle Mines Limited AEM, Northern Dynasty Minerals, Ltd. NAK and B2Gold Corp BTG. While Agnico Eagle sports a Zacks Rank #1 (Strong Buy), Northern Dynasty Minerals and B2Gold carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has an expected earnings growth rate of 103.1% for 2020. Its shares have returned 45.5% in the past year.

Northern Dynasty Minerals has an expected earnings growth rate of 42.9% for 2020. The company’s shares have surged 33.9% in the past year.

B2Gold has an expected earnings growth rate of 250% for 2020. The company’s shares have gained 104.1% in the past year.

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