ArcelorMittal ( MT Quick Quote MT - Free Report) have gained around 28% so far this year. The steel giant 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. Let’s delve deeper into the factors that make this Zacks Rank #1 (Strong Buy) stock an attractive choice for investors right now. Price Performance
Shares of ArcelorMittal have surged 136.5% over the past year against the 108% rise of its
industry. It has also outperformed the S&P 500’s roughly 33.6% rise over the same period.
Image Source: Zacks Investment Research Estimates Northbound
Over the past two months, the Zacks Consensus Estimate for ArcelorMittal for 2021 has increased around 21%. The consensus estimate for third-quarter 2021 has also been revised 47.9% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.
Solid Growth Prospects
The Zacks Consensus Estimate for earnings for 2021 for ArcelorMittal is currently pegged at $12.90, reflecting an expected year-over-year growth of 1,775.3%. Moreover, earnings are expected to register 3,186.7% growth in third-quarter 2021.
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 3.05, cheaper compared with the industry average of 5.60. Growth Drivers in Place
ArcelorMittal is seeing a strong rebound in end-market demand following the easing of lockdown measures. The company, in July, bumped up its outlook for global apparent steel consumption (“ASC”) for 2021 as it expects demand to further improve in the second half. It now sees 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, the company noted.
Higher steel prices are also driving the company’s results. Its average steel selling prices went up around 61% year over year in the second quarter of 2021 and boosted bottom line. Strong end-market demand, tight supply and higher raw material costs are driving steel prices. The company also remains focused on maintaining a competitive cost advantage and strategically growing through high-return projects in high-growth markets. It also intends to leverage existing infrastructure to develop its iron-ore resources, consistently return cash to shareholders through a defined capital return policy as well as lead on sustainable development. 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 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.
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include
The Mosaic Company ( MOS Quick Quote MOS - Free Report) , United States Steel Corporation ( X Quick Quote X - Free Report) and Olympic Steel, Inc. ( ZEUS Quick Quote ZEUS - Free Report) , each sporting a Zacks Rank #1. You can see . the complete list of today’s Zacks #1 Rank stocks here Mosaic has an expected earnings growth rate of 471.8% for the current year. The stock has also rallied around 78% over a year.
U.S. Steel has a projected earnings growth rate of 368.9% for the current year. The company’s shares have shot up around 193% in a year.
Olympic Steel has an expected earnings growth rate of 2,362.2% for the current year. The company’s shares have rallied around 90% in the past year.