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On Jan 2, Zacks Investment Research upgraded steel giant ArcelorMittal (MT - Analyst Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

ArcelorMittal raked in better-than-expected third-quarter 2013 results on Nov 7, helped by its cost reduction measures. Its adjusted loss was narrower than the Zacks Consensus Estimate. Revenues fell modestly but beat expectations. Shipments rose on a year over year basis in the quarter.

ArcelorMittal expects that profitability for 2013 will be driven by rise in steel and marketable iron ore shipments as well as realized benefits from Asset Optimization and Management Gains initiatives. The company envisions Asset Optimization to deliver meaningful savings this year.

ArcelorMittal is expanding its steel-making capacity and raw materials self-sufficiency through a combination of brownfield growth, new greenfield projects and acquisition opportunities, mainly in emerging markets.

ArcelorMittal is also highly focused on reducing debt, lowering costs and improving efficiency. The company maintains its $15 billion medium-term net debt target. On the cost-saving front, ArcelorMittal is progressing with a new $3 billion cost optimization program that mostly focuses on variable cost reductions in its plants.

The company is also progressing with its mining growth projects and is on track to boost iron ore production capacity in its own mines to 84 million tons by 2015 from 56 million tons in 2012. A second phase expansion in its operations in Liberia is currently underway.

Other Stocks to Consider

Other companies in the steel and related industries with favorable Zacks Rank are Companhia Siderurgica Nacional (SID - Analyst Report), AK Steel Holding Corporation (AKS - Analyst Report) and Worthington Industries, Inc. (WOR - Snapshot Report). While Companhia Siderurgica holds a Zacks Rank #1 (Strong Buy), both AK Steel and Worthington Industries retain a Zacks Rank #2 (Buy).

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