ArcelorMittal (NYSE: MT) reported Q3 earnings which missed on the top-line but missed on the bottom-line. Shares were higher in the ensuing session but gave up most of these gains in the following session. ArcelorMittal is the world's largest steelmaker.
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.