ArcelorMittal (MT +7.63%) will release its quarterly report on Thursday, and given how dire conditions have been in the steel industry in recent years, it's no surprise to see the stock continue to tread water near decade-lows. Increasingly, impatient investors are wondering what it will take to get ArcelorMittal earnings to move substantially higher, and thus far, the company hasn't discovered any secrets to bolstering the hard-hit market.
ArcelorMittal certainly isn't alone in its woes, as steel producers and the suppliers of materials like iron ore and metallurgical coal have all suffered from the drop in infrastructure building and construction activity, especially from slowing emerging-market economies. The question is how long the global slowdown will last and whether the next up-cycle will make up for all the pain that investors have endured. 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
|
Analyst EPS Estimate |
$0.09 |
|
Change From Year-Ago EPS |
(84%) |
|
Revenue Estimate |
$20.7 billion |
|
Change From Year-Ago Revenue |
(7.9%) |
|
Earnings Beats in Past 4 Quarters |
1 |
Source: Yahoo! Finance.
Why aren't ArcelorMittal earnings recovering?
In recent months, analysts have marked down their views on ArcelorMittal earnings, cutting $0.15 per share from their June-quarter estimates and double that amount from full-year 2013 and 2014 predictions. The stock has shown some signs of life, rising 8% since late April, although it remains sharply lower over the past year.
ArcelorMittal hasn't gotten a break from the tough conditions hitting the steel industry, as its first-quarter results reflected the continuing pressure of weak demand in the U.S. and Europe on its revenue growth. Although the company cited a potential restocking based on low inventory levels as potentially driving improvements in the second half of 2013, it also marked down its long-range, four-year growth estimates from 3% to 2%.
Another problem that ArcelorMittal and other steel companies have faced is the emerging Chinese steel industry. China subsidizes its steelmakers, and with Chinese infrastructure and construction activity being relatively weak, oversupply is spilling over and having an impact on world steel prices. Recycled scrap producer Schnitzer Steel (SCHN +0.00%) noted last month that market prices for its exports fell by $50 per ton during its most recent quarter, and given Schnitzer's exposure to Asia, those figures likely reflect China's contribution to the global weakness.
In response, ArcelorMittal has prepared itself for tough times, with spending and capacity cuts as well as asset sales. That stands in contrast to Nucor (NUE 0.39%), which reported higher spending on marketing and administrative costs as part of the reason its earnings dropped by 23% in its second-quarter report earlier this month.
In looking at the ArcelorMittal earnings report, look to see how the company fares in Europe. U.S. Steel (X +0.00%) was able to announce a profit in its European business in its earnings announcement this morning, and if ArcelorMittal can find greater strength on its home turf, then it could lead to the turnaround investors have so desperately wanted to see. Otherwise, the recovery for ArcelorMittal could take a while longer.
Click here to add ArcelorMittal to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
