ArcelorMittal’s (MT - Free Report) stock looks promising at the moment. 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 Luxembourg-based steel behemoth an intriguing investment option.
What’s Working in Favor of ArcelorMittal?
An Outperformer: ArcelorMittal has trounced the Zacks categorized Steel Producers industry over a year. The company’s shares have rallied around 55.8% over this period, compared with roughly 28.5% gain recorded by the industry.
Solid Rank & VGM Score: ArcelorMittal currently has a Zacks Rank #2 (Buy) and a Value Growth Momentum Score (VGM Score) of ‘B’. Our research shows that stocks with a VGM Score of ‘A’ or ‘B’ combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment.
Positive Earnings Surprise History: ArcelorMittal has an impressive earnings surprise history. The company has outpaced the Zacks Consensus Estimate in three of the trailing four quarters, delivering a positive average earnings surprise of 145.19%.
Estimates Moving Up: Annual estimates for ArcelorMittal have moved north over the past three months, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2017 has increased by around 19.5% to $3.00 per share. The Zacks Consensus Estimate for 2018 has also moved up 22.3% over the same timeframe to $2.80.
Attractive Valuation: 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 4.19, cheaper compared with the industry average of 7.02.
Superior Return on Equity (ROE): ArcelorMittal’s ROE of 10.1%, as compared with the industry average of 8.7%, manifests the company’s efficiency in utilizing shareholder’s funds.
Upbeat Guidance: ArcelorMittal expects global apparent steel consumption (ASC) to rise 0.5%–1.5% year over year in 2017. In the U.S., the company sees apparent steel consumption growth of 3%–4% in 2017. The company also anticipates 0.5%–1.5% growth in apparent steel consumption in Europe. Moreover, apparent steel consumption is forecasted to rise 3%–4% in Brazil. Demand for steel in China is also likely to stabilize in 2017.
Growth Drivers in Place: ArcelorMittal remains focused on progressing in three areas – cost optimization, product mix and volume growth. The company should gain from its efforts to reduce debt, lower costs, expand capacity and improve efficiency. These moves are expected to lead to better operational performance.
ArcelorMittal’s net debt decreased to $12.1 billion at the end of first-quarter 2017 from $17.3 billion a year ago. The long-term debt-to-capital ratio of the company is 24.6%, lower than industry average of 31.7%. The company’s debt reduction actions are expected to lead to a reduction in interest expenses in 2017.
ArcelorMittal is also making a significant progress in its cost-cutting initiatives under the Action 2020 program, a strategic roadmap for each of the company’s key segments. The Action 2020 program includes plans to optimize costs and increase steel shipment volumes, along with improving the portfolio of high added value products. The program contributed $900 million to operating results in 2016 and is expected to make a healthy contribution in 2017.
ArcelorMittal also remains committed to expand its automotive steel line of products. The company is expanding its global portfolio of automotive steels by launching a new generation of advanced high strength steels. It is also looking to expand its family of third-generation advanced high strength steel. The launch of these steels is in sync with the company’s Action 2020 program. These products will ensure that the company is best positioned to meet customer requirements via a strong technical and product portfolio.
Other Stocks to Consider
Other well-placed companies in the basic materials space include Ternium S.A. (TX - Free Report) , POSCO (PKX - Free Report) and The Chemours Company (CC - Free Report) , all sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ternium has an expected long-term earnings growth of 7.9%.
POSCO has an expected long-term earnings growth of 5%.
Chemours has an expected long-term earnings growth of 15.5%.
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