ArcelorMittal’s 3Q16 Earnings: What’s the Word on Wall Street?
By Mark O'Hara | Nov 1, 2016 10:39 am EDT
ArcelorMittal’s 3Q16 earnings
ArcelorMittal (MT), the world’s largest steelmaker, will release its 3Q16 earnings on November 8. It has been a remarkable year for the company. The stock has gained almost 110% year-to-date. The stock’s performance has been led by improved steel market conditions globally.
ArcelorMittal’s 3Q16 Earnings: What’s the Word on Wall Street?
3Q16 earnings season
We’re in the middle of the 3Q16 earnings season. Nucor (NUE), AK Steel (AKS), and Steel Dynamics (STLD) have already released their 3Q16 earnings. U.S. Steel’s (X) 3Q16 earnings are expected on November 1. You can read U.S. Steel’s 3Q16 Earnings: What’s the Word on Wall Street? to find out analysts’ expectations from U.S. Steel’s 3Q16 earnings.
So far, it has been a mixed earnings season for steel companies (XME). While Steel Dynamics’ 3Q16 earnings were more or less in line with the estimates, Nucor missed consensus revenue as well as earnings estimates. However, AK Steel managed to beat analysts’ earnings estimates handsomely. Markets also rewarded AK Steel for its better-than-expected earnings. As a result, its share price rose. Since then, AK Steel saw downward price action after the company announced a fresh issue of equity shares. Notably, other steelmakers including ArcelorMittal and U.S. Steel raised cash by selling shares in 2016.
Series overview
In this series, we’ll explore analysts’ expectations for ArcelorMittal’s 3Q16 earnings. We’ll also look at the key points that ArcelorMittal investors should watch for in the company’s 3Q16 earnings conference call. Let’s start by analyzing what Wall Street expects for ArcelorMittal’s revenues in 3Q16.
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PART 2
ArcelorMittal’s 3Q16 Earnings: What’s the Word on Wall Street PART 2 OF 4
Can ArcelorMittal Beat Consensus Revenue Estimates?
By Mark O'Hara | Nov 1, 2016 10:39 am EDT
Consensus revenue estimates
According to data compiled by Bloomberg, analysts expect ArcelorMittal (MT) to post revenues of $15.1 billion in 3Q16. In contrast, ArcelorMittal posted revenues of nearly ~$15.6 billion in 3Q15 and ~$14.7 billion in 2Q16. Analysts expect ArcelorMittal’s 3Q16 revenues to fall on a year-over-year basis. They expect the revenues to rise on a sequential quarterly basis.
Can ArcelorMittal Beat Consensus Revenue Estimates?
Revenue miss
ArcelorMittal, along with most other US-based steelmakers, missed consensus revenue estimates in 2Q16. The trend isn’t different in 3Q16. Nucor (NUE) and AK Steel (AKS) missed 3Q16 consensus revenue estimates, while Steel Dynamics’ (STLD) 3Q16 revenues were more or less in line with estimates.
We should note that steel companies’ revenues are basically a function of shipments and average selling prices. Shipments depend on end-user demand as well as import penetration. Last year, US steel companies reported fewer shipments due to the high level of import penetration. However, we saw US steel imports taper down this year as trade duties have been imposed on flat-rolled steel imports from countries including China. Europe also started to clamp down on cheap imports to protect the domestic steel industry.
Seasonally slow quarter
The third quarter is seasonally slow for ArcelorMittal as steel demand, especially in its core end market of Europe (VGK), tends to slow down in the second half of the year. Because of the seasonal slowdown, ArcelorMittal could report a sequential decline in its steel shipments. While the seasonal demand slowdown would be a drag on ArcelorMittal’s 3Q16 revenues, it could be supported by sequentially higher steel prices.
Along with the revenues, it’s also important to track profitability metrics. We’ll discuss this more in the next part of the series.