ArcelorMittal's (MT) Q4 Earnings And Sales Beat Estimates

ArcelorMittal (NYSE:MT) slipped to a net loss of $1,882 million or $1.86 per share in fourth-quarter 2019 from a profit of $1,193 million or $1.17 in the year-ago quarter. The results were impacted by lower steel prices.

Barring one-time items, adjusted loss per share were 22 cents, which was narrower than the Zacks Consensus Estimate of a loss of 46 cents.

Total sales fell 15.4% year over year to $15,514 million in the quarter. However, the figure beat the Zacks Consensus Estimate of $15,356.5 million.

Total steel shipments fell 2.5% year over year to 19.7 million metric tons. Excluding the impact of the ArcelorMittal Italia buyout and the remedy asset sales, steel shipments dropped 0.2%. Average steel selling prices fell 16.2% year over year.

2019 Highlights

In 2019, total sales fell 7.1% year over year to $70.6 billion, mainly due to lower average steel selling prices. Nevertheless, the decline was partly offset by higher steel shipments as well as iron ore selling prices.

The company reported a net loss of $2,454 million or $2.42 per share against net income of $5,149 million or $5.04 per share a year ago.

Total shipments in 2019 inched up 0.8% year over year to 84.5 million metric tons.

Segment Review

NAFTA: Crude steel production rose 4.7% year over year to 5.3 million metric tons in the reported quarter. Steel shipments fell 2.8% year over year to 5 million metric tons. Sales fell nearly 17.2% year over year to $4 billion. Average steel selling price declined 17.1% year over year to $731 per ton.

Brazil: Crude steel production fell 22% year over year to 2.5 million metric tons. Shipments fell 11% year over year to 2.7 million metric tons. Sales declined 21.7% year over year to $1.9 billion. Average steel selling price fell 8.6% year over year to $628 per ton.

Europe: Crude steel production fell 22% year over year to 9 million metric tons in the reported quarter. Shipments fell 8% year over year to nearly 9.3 million metric tons. Sales fell 17.7% year over year to $8 billion, while average steel selling price declined 15.2% year over year to $654 per ton.

Asia Africa and CIS (ACIS): Sales fell 7.4% year over year to $1.6 billion. Crude steel production totaled nearly 3 million metric tons, relatively unchanged year over year. Shipments rose 11.8% year over year to around 3 million metric tons. Average selling prices declined 18% year over year to $460 per ton.

Mining: Iron ore production totaled 14.8 million metric tons, down from 14.9 million metric tons in the year-ago quarter. Coal production totaled 1.4 million metric tons, up from 1.3 million metric tons in the prior-year quarter. Sales inched down 0.8% year over year to $1.1 billion.

Financials

At the end of 2019, ArcelorMittal had cash and cash equivalents of around $5 billion, up 112.2% from $2.4 billion in 2018. The company’s long-term debt was $11.5 billion, up 23.1% year over year.

Net cash from operating activities surged 43.4% year over year to $6 billion in 2019.

Outlook

ArcelorMittal stated that the real demand slowdown is starting to stabilize. The company expects apparent steel consumption (ASC) in the core markets to grow in 2020.

In 2020, ArcelorMittal anticipates global ASC growth in the range of 1-2% compared with 1.1% witnessed in 2019.

In the United States, the company projects ASC growth of flat-to-1% in 2020 against an estimated contraction of 1.7% in 2019. ASC growth in flat products are expected to offset the anticipated decline for long products.

In Europe, the company expects the end of destocking to support improved ASC for flat products amid anticipated weakness in automotive. Similarly, it also expects the end of destocking to offset the impact of the slowdown in construction activity on long products ASC. The net effect of these factors is expected to support ASC growth of 1-2% in the region in 2020 against an estimated contraction of 4.3% in 2019.

ASC is expected to rise 4-5% in Brazil following an expected growth in construction activity. Notably, ASC contracted 2.6% in 2019.

In China, the company expects overall demand growth to be flat-to-1% in 2020 compared with an estimated growth of 3.2% in 2019. This is likely to be driven by strong real estate activity. The company also expects the impact of the coronavirus outbreak to have a short-term negative impact on steel demand in China.

Price Performance

ArcelorMittal’s shares have lost 20.5% in the past year compared with 18.4% decline of the industry.

Zacks Rank & Key Picks

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

Few better-ranked stocks in the basic materials space are Daqo New Energy Corp (NYSE:DQ) , Royal Gold, Inc (NASDAQ:RGLD) and Impala Platinum Holdings Limited (OTC:IMPUY) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has projected earnings growth rate of 326.3% for 2020. The company’s shares have rallied 93.2% in the past year.

Royal Gold has an estimated earnings growth rate of 83.5% for fiscal 2020. Its shares have returned 27.5% in the past year.

Impala Platinum has an expected earnings growth rate of 465.5% for fiscal 2020. The company’s shares have surged 205.1% in the past year.

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