Back to top

Image: Bigstock

What Makes ArcelorMittal (MT) Stock a Solid Choice Right Now

Read MoreHide Full Article

Shares of ArcelorMittal (MT - Free Report) have popped around 16% over the past three months. It is benefiting from improved market conditions and higher steel prices. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.

ArcelorMittal has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.

Let’s delve deeper into the factors that make this steel giant an attractive choice for investors right now.

An Outperformer

Shares of ArcelorMittal have surged 240.6% over the past year against the 175.6% rise of its industry. It has also outperformed the S&P 500’s roughly 45.3% rise over the same period.

 

 

 

Estimates Northbound

Over the past two months, the Zacks Consensus Estimate for ArcelorMittal for 2021 has increased around 112.1%. The favorable estimate revisions instill investor confidence in the stock.

Strong Growth Prospects

The Zacks Consensus Estimate for earnings for 2021 for ArcelorMittal is currently pegged at $4.73, reflecting an expected year-over-year growth of 714.3%. Moreover, earnings are expected to register a 370% growth in first-quarter 2021. The company also has an expected long-term earnings per share growth rate of 15.2%, above the industry average of 11.3%.

Valuation Looks Attractive

ArcelorMittal’s shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.

Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value steel stocks, ArcelorMittal is currently trading at trailing 12-month EV/EBITDA multiple of 7.09, cheaper compared with the industry average of 10.84.

Upbeat Prospects

ArcelorMittal is witnessing a rebound in demand, especially in automotive, following the easing of lockdown measures. It envisions global apparent steel consumption (“ASC”) to grow 4.5-5.5% in 2021. This compares with a contraction of 1% in 2020. The global steel industry is now benefiting from a favorable supply-demand balance that is supporting rising utilization as demand recovers. ArcelorMittal sees ASC to grow year over year in 2021 in all of its core markets based on this positive outlook.

Moreover, the company is expanding its steel-making capacity and remains focused on shifting to high-added-value products. Its cost-reduction initiatives will also support profitability.

ArcelorMittal recently revealed a new $1 billion fixed cost reduction program which it expects to complete by the end of next year. The program includes actions to improve productivity and maintenance efficiency, and rationalize support functions. The company noted that the plan includes a 20% reduction in corporate office headcount. ArcelorMittal expects to achieve the majority of the savings in 2021. Roughly 40% of these savings are expected to be achieved through productivity.

The company should also benefit from higher steel prices. Its average steel selling prices went up around 6% year over year in the fourth quarter of 2020 and boosted bottom line. Strengthening end-market demand, tight supply and higher raw material costs are driving steel prices.

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Fortescue Metals Group Limited (FSUGY - Free Report) , BHP Group (BHP - Free Report) and United States Steel Corporation (X - Free Report) .

Fortescue has a projected earnings growth rate of 107.8% for the current fiscal. The company’s shares have surged around 187% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

BHP Group has a projected earnings growth rate of 76.8% for the current fiscal year. The company’s shares have shot up around 136% in a year. It currently carries a Zacks Rank #1.

U.S. Steel has an expected earnings growth rate of 156.8% for the current year. The company’s shares have surged around 354% in the past year. It currently carries a Zacks Rank #2.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.

Click here for the 4 trades >>