ArcelorMittal's (MT) Earnings And Revenues Rise Y/Y In Q4

ArcelorMittal (NYSE:MT) delivers higher profits in fourth-quarter 2018. The company recorded net income of $1,193 million or $1.17 per share, up from $1,039 million or $1.01 in the year-ago quarter. Adjusted earnings for the quarter came in at $1.31 per share.

Total sales went up roughly 3.5% year over year to $18,327 million in the fourth quarter on the back of higher average steel selling prices and improved market-priced iron ore shipments. This was partly offset by lower steel shipments.

Total steel shipments fell to 20.2 million metric tons from 21 million in the year-ago quarter. The decline primarily stemmed from lower steel shipments across Europe and ACIS (owing to operational issues in Temirtau, Kazakhstan). Nevertheless, the downside was partly offset by an improvement in NAFTA.

2018 Highlights

In 2018, total sales increased 10.7% year over year to $76 billion, mainly due to higher average steel selling prices, partly offset by lower steel shipments.

Net income came in at $5,149 million or $5.04 per share, up from $4,568 million or $4.46 per share a year ago.

Total shipments for the year fell 1.6% year over year to 83.9 million metric tons.

Segment Review

NAFTA: Crude steel production fell around 10.2% year over year to 5 million metric tons. Steel shipments inched up 0.4% year over year to 5.2 million metric tons. Sales increased roughly 13.5% year over year to roughly $4.9 billion. Average steel selling price rose 17.9% year over year to $882 per ton.

Brazil: Crude steel production rose roughly 6.8% year over year to 3.2 million metric tons. Shipments were roughly 3.1 million metric tons, essentially flat year over year. Sales increased 7.9% year over year to $2.4 billion. Average steel selling price inched up roughly 0.3% year over year to $687 per ton.

Europe: Crude steel production rose 12.3% year over year to 11.6 million metric tons in the reported quarter. Shipments fell 0.5% year over year to roughly 10 million metric tons. Sales increased about 1.6% year over year to $9.8 billion, while average steel selling price rose 4.8% year over year to $771 per ton.

Asia Africa and CIS (ACIS): Sales fell around 13.5% year over year to $1.8 billion. Crude steel production totaled roughly 3 million metric tons, down around 22.4% year over year. Shipments fell around 18% year over year to 2.7 million metric tons. Average selling prices increased roughly 2.7% year over year to $561 per ton.

Mining: Iron ore production totaled 14.9 million metric tons, up from 14.4 million metric tons a year ago. Coal production totaled 1.3 million metric tons, down from 1.5 million metric tons a year ago. Sales were up 16.2% year over year to $1.1 billion.

Financials

As of Dec 31, 2018, ArcelorMittal had cash and cash equivalents of roughly $2.4 billion, down from $2.8 billion a year ago. The company’s long-term debt was around $9.3 billion, down roughly 8.2% year over year.

Net cash provided by operating activities was $2,170 million in the fourth quarter of 2018 compared with $2,885 million a year ago.

Outlook

In 2019, ArcelorMittal anticipates global apparent steel consumption (ASC) growth in the range of 0.5-1%, down from 2.8% in 2018.

In the United States, the company projects ASC growth of 0.5-1.5% in 2019. While automotive demand is likely to remain stable, growth is expected to be driven by sustained albeit weaker demand in machinery and construction. This compares to a growth of 1.7% witnessed in 2018.

In Europe, sustained strength in construction is likely to be balanced by slower growth in machinery and stable automotive demand. These factors are expected to support ASC growth of roughly 0.5-1% in 2019 compared with a growth of 2.9% in 2018.

ASC is expected to rise 3.5-4.5% in Brazil as growth in machinery and automotive slows in the region but construction activity is witnessing an uptick for the first time since 2013. Notably, ASC expanded 7.3% in 2018.

In China, the company expects overall demand to decline 0.5-1.5% in 2019, against growth of 3.5% in 2018. A relatively stable demand from construction and automotive is likely to be offset by declining machinery output.

Based on these expectations, the company expects to witness increased steel shipments in 2019 on year-over-year basis. Capital expenditure is also expected to increase to $4.3 billion from $3.3 billion in 2018.

Price Performance

ArcelorMittal’s shares have lost 28.7% in the past year compared with 17% decline of the industry.

Zacks Rank & Stocks to Consider

ArcelorMittal currently carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the basic materials space include Rio Tinto (LON:RIO) plc (NYSE:RIO) , The Mosaic Company (NYSE:MOS) and Israel Chemicals Ltd (NYSE:ICL) . While Rio Tinto currently sports a Zacks Rank #1 (Strong Buy), Mosaic and Israel Chemicals carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rio Tinto has an expected earnings growth rate of 5.1% for 2019. The company’s shares have moved up 7.7% in the past year.

Mosaic has an expected earnings growth rate of 24% for 2019. Its shares have rallied 30.2% in a year’s time.

Israel Chemicals has an expected earnings growth rate of 11.1% for 2019. Its shares have improved 38.6% in a year’s time.

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