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Can ArcelorMittal Beat Consensus Revenue Estimates?

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Nov. 1 2016, Published 10:39 a.m. ET

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.

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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.

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