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ArcelorMittal's (MT) Stock Up 36% in 6 Months: Here's Why

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ArcelorMittal’s (MT - Free Report) shares have popped 36.2% over the past six months. The steel giant has also outperformed its industry’s rise of 31.5% over the same time frame. Moreover, it has topped the S&P 500’s roughly 18% rise over the same period.

Let’s take a look into the factors that are driving this Zacks Rank #1 (Strong Buy) stock.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

What’s Going in MT’s Favor?

Forecast-topping earnings performance in the second quarter and an upbeat steel demand outlook for 2021 have contributed to the run-up in ArcelorMittal’s shares. The company swung to a profit in the second quarter on the back of continued demand recovery and higher steel selling prices. Earnings of $3.46 per share topped the Zacks Consensus Estimate of $2.70.

The company, in its second-quarter call, raised its outlook for global apparent steel consumption (“ASC”) for 2021 as it expects demand to further improve in the second half. It now envisions ASC to increase 7.5-8.5% in 2021, up from its earlier growth expectation of 4.5-5.5%. A favorable supply demand balance and a low inventory environment are supporting higher utilization levels and healthy steel spreads, ArcelorMittal noted.

ArcelorMittal is seeing a strong rebound in demand following the easing of lockdown measures. 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.

The company is executing a new $1 billion fixed cost reduction program. The program includes actions to improve productivity and maintenance efficiency, and rationalize support functions. ArcelorMittal expects to achieve the majority of the savings in 2021. Roughly 40% of these savings are expected to be achieved through productivity.

ArcelorMittal is also gaining from a rally in steel prices. Its average steel selling prices went up around 61% year over year in the second quarter and boosted bottom line. Strengthening end-market demand, tight supply and higher raw material costs are driving steel prices. Higher steel prices should support its bottom line in 2021.

Earnings estimates for ArcelorMittal have also been going up over the past two months. Over the past month, the Zacks Consensus Estimate for ArcelorMittal for 2021 has increased 44.4%. The consensus estimate for 2022 has also been revised 65.3% upward over the same time frame.

 

ArcelorMittal Price and Consensus

 

ArcelorMittal Price and Consensus

ArcelorMittal price-consensus-chart | ArcelorMittal Quote

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Nucor Corporation (NUE - Free Report) , Olympic Steel, Inc. (ZEUS - Free Report) and Schnitzer Steel Industries, Inc. (SCHN - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nucor has an expected earnings growth rate of 478.7% for the current year. The company’s shares have shot up around 143% in the past year.

Olympic Steel has a projected earnings growth rate of 2,362.2% for the current year. The company’s shares have surged around 126% in a year.

Schnitzer Steel has an expected earnings growth rate of 1,253.5% for the current fiscal year. The stock has also rallied around 141% over a year.