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ArcelorMittal (MT) Stock Up 69% in a Year: Here's Why

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Shares of ArcelorMittal (MT - Free Report) have shot up around 69% over a year. The company has also outperformed its industry's gain of roughly 43% over the same time frame.  

ArcelorMittal, a Zacks Rank #2 (Buy) stock, has a market cap of roughly $34.6 billion and average volume of shares traded in the last three months is around 2,959.8K.

Let’s take a look into the factors that are driving this steel behemoth.


Driving Factors

Solid earnings performance, upbeat outlook and the company’s internal initiatives have contributed to a rally in ArcelorMittal’s shares. ArcelorMittal is also gaining from its efforts to reduce debt, lower costs, expand capacity and improve efficiency.

ArcelorMittal saw its profits rise roughly 19% year over year in first-quarter 2018, helped by a spike in steel prices. Revenues also climbed by double digits year over year in the quarter on the back of higher average steel selling prices and increased steel shipments.

ArcelorMittal, in its first-quarter call, said that market conditions are favorable and demand environment remains positive along with healthy steel spreads. The company continues to expect global apparent steel consumption to grow in the range of 1.5-2.5% in 2018.

ArcelorMittal remains focused on implementing strategic measures under its Action 2020 plan to drive profitability. The plan is a strategic roadmap for each of the company’s key segments, which targets a structural EBITDA improvement of about $3 billion. The program contributed $0.6 billion to EBITDA in 2017 with cumulative benefit of $1.5 billion.

The company also remains on track with its cost-reduction actions under the program and is focused on deleveraging its balance sheet. Sustained commitment to reduce debt is leading to lower net interest expenses.

ArcelorMittal is also expanding its global portfolio of automotive steels by launching a new generation of advanced high strength steels, in line with the Action 2020 program.

The company has also announced a three-year investment program of roughly $1 billion at its Mexican operations, which is geared toward improving the quality and efficiency of operations. It 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.

ArcelorMittal, last month, also received the approval of the European Commission (EC) for its planned acquisition of Ilva S.p.A, marking a major milestone and a key step toward the deal closure.

The EC’s approval followed the conclusion of its Phase II probe into the proposed buyout of Ilva. The merger clearance has been granted on the basis that ArcelorMittal has committed to dispose of assets in Romania, Macedonia, Italy, Luxembourg, Belgium and Czech Republic.

ArcelorMittal believes that Ilva will prove to be a good investment without compromising the strength of its balance sheet. It will provide an opportunity to expand leadership and product offering in Italy, the second-largest steel producing and consuming market in Europe.

ArcelorMittal Price and Consensus


ArcelorMittal Price and Consensus | ArcelorMittal Quote

Other Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Westlake Chemical Corporation (WLK - Free Report) , Celanese Corporation (CE - Free Report) and FMC Corp. (FMC - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied roughly 80% over a year.

Celanese has an expected long-term earnings growth rate of 8.9%. Its shares have rallied roughly 28% over a year.

FMC has an expected long-term earnings growth rate of 14.3%. The company’s shares have gained around 19% in a year.

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