ArcelorMittal Aims for a Big Turnaround

On Friday, ArcelorMittal (MT -0.26%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

As a major player in the steel industry, ArcelorMittal has struggled due to the slowdown in the global economy and in construction and infrastructure activity around the world. But despite those pressures, the steel giant has plans to get back to its growth path. Let's take an early look at what's been happening with ArcelorMittal over the past quarter and what we're likely to see in its quarterly report.

Stats on ArcelorMittal

Source: Yahoo! Finance.

Can ArcelorMittal's earnings rebound?
In recent months, analysts have gotten a lot more pessimistic about ArcelorMittal's earnings, reversing their initial calls for a profit of $0.19 per share for the first quarter and slashing their full-year 2013 estimates by 40%. Shareholders have seen similarly bad declines, with the stock losing more than a quarter of its value since early February.

The entire steel industry has experienced sluggish performance in light of the slowdown in China and weak conditions in Europe and elsewhere around the world. Already, we've seen U.S. Steel (X -0.25%) report much worse-than-expected earnings as well as project further challenges for the industry ahead. Given ArcelorMittal's particularly large exposure to Europe, it stands to lose the most from austerity measures that have brought the European economy to the brink of recession.

That has had dramatic effects not just on steelmakers like ArcelorMittal but also on the companies that supply them with raw materials. Cliffs Natural Resources (CLF -1.85%), which counts ArcelorMittal as one of its largest customers, had to cut its dividend by more than 75% in light of low iron ore prices due to poor demand. Given ArcelorMittal's huge debt, a decline in its long-standing dividend isn't out of the question.

Yet ArcelorMittal does have some potential bright spots. The auto industry is an important source of demand, and relatively favorable figures in areas like Latin America could help boost the company's longer-term prospects. Moreover, unless Europe proceeds to get much worse, an eventual cyclical upturn should help the long-suffering shares rebound in the future.

In ArcelorMittal's quarterly report, watch closely to see what the company does with its newly approved increase in authorized shares. With shareholders having allowed the boost of almost 20%, the big question will be whether ArcelorMittal does a dilutive stock offering at these low prices to pay down debt. That could be further bad news for investors who've already taken a big hit on their investments.

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