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 steel behemoth an intriguing choice for investors right now.
What’s Working in Favor of MT?
An Outperformer: ArcelorMittal has trounced the industry over a year. The company’s shares have rallied around 52.3% over this period, compared with roughly 31.6% gain recorded by the industry.
Solid Rank & VGM Score: ArcelorMittal currently has a Zacks Rank #2 (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 (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 each of the trailing four quarters, delivering a positive average earnings surprise of 42.1%.
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 5.8, cheaper compared with the industry average of 6.6.
Growth Drivers in Place: ArcelorMittal, in its third-quarter call, said that market conditions are favorable and demand environment remains positive along with healthy steel spreads. It continues to see global apparent steel consumption to grow in the range of 2.5-3% for 2017.
ArcelorMittal 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 remains focused on implementing strategic measures under its Action 2020 plan to drive profitability. The Action 2020 plan is a strategic roadmap for each of the company’s key segments, which targets a structural EBITDA improvement of about $3 billion. Upon full achievement of the plan, the company expects to deliver free cash flow of more than $2 billion annually.
The company also remains on track with its cost-reduction actions under the program. Moreover, it remains highly focused on deleveraging its balance sheet and sustained commitment to cut debt is leading to lower net interest expenses. ArcelorMittal has cut net debt by nearly 45% over the past five years and net debt fell by $0.2 billion year over year in the third quarter of 2017.
The company is also expanding its global portfolio of automotive steels by launching a new generation of advanced high strength steels. The launch of these steels is in line with the Action 2020 program that aims to achieve targeted financial improvements for the company by 2020.
Also, in sync with the Action 2020 plan, ArcelorMittal has announced a three-year investment program of roughly $1 billion at its Mexican operations. The investment, which is geared toward improving the quality and efficiency of operations, will allow ArcelorMittal Mexico to produce 2.5 million tons of flat rolled steel that will be supplied to customers of domestic non-auto and general industry.
Other Stocks to Consider
Other top-ranked companies in the basic materials space include Huntsman Corporation (HUN - Free Report) , Kronos Worldwide, Inc. (KRO - Free Report) and Air Products and Chemicals, Inc. (APD - Free Report) , all carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Huntsman has an expected long-term earnings growth of 8%. The stock has gained around 71% over a year.
Kronos has an expected long-term earnings growth of 5%. The stock has gained around 115% over a year.
Air Products has an expected long-term earnings growth of 14.1%. Its shares are up roughly 17% over a year.
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