ArcelorMittal
Inside the Numbers
In Q3, the company reported $4.27 in earnings per share, compared to a loss of $0.21 in Q3 of last year. This was better than expectations of $4.17 per share. The major factor in outperformance was a strong pricing environment which led to the biggest quarterly profit since 2008.
Revenue was 52% year higher, reaching $20.2 billion which fell short of expectations of $22.4 billion. Higher revenue was also due to higher steel and iron ore prices.
Total steel shipments declined 17% to 14.6 million tons. This was largely due to a decline in automotive demand due to production constraints. Shipments were also down 9% sequentially. The company ended the quarter with $4.4 billion in cash and generated $1.6 billion in free cash flow. which is about 5% of its total market cap.
Stock Price Outlook
Overall, ArcelorMittal shares have been quite strong since the March 2020 low in stocks due to a recovery in steel prices. The stock is up nearly 5-folds from the bottom but is down nearly 20% since its highs in August. Most of the stock's gains are due to the recovery in steel prices which is up nearly 50% from its 2020 lows.
However, steel prices have declined by nearly 30% since the summer due to a weakening Chinese economy and more pessimism about the economic outlook. Further, many companies have invested in new production which could be a headwind for further appreciation.
The stock's fate is likely determined by whether economic growth and steel demand will be sufficient enough to offset an increase in supply.