ArcelorMittal (MT) Up 49% in a Year: What's Driving the Stock?

ArcelorMittal MT has seen its shares shoot up roughly 49% over a year. The company has also outperformed its industry’s gain of around 30% to over the same time frame.  

ArcelorMittal, a Zacks Rank #2 (Buy) stock, has a market cap of roughly $36.2 billion and average volume of shares traded in the last three months is around 3,527.6K. The company has an expected long-term earnings per share growth of 13.4%, higher than the industry average of 7%.

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

 

Driving Factors

Forecast-topping earnings performance, upbeat outlook and the company’s internal initiatives have contributed to a rally in ArcelorMittal’s shares. The company has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of around 42.1%. ArcelorMittal is also gaining from its efforts to reduce debt, lower costs, expand capacity and improve efficiency.

ArcelorMittal, in November, said that market conditions are favorable and demand environment remains positive along with healthy steel spreads. It sees global apparent steel consumption to grow in the range of 2.5-3% for 2017.

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’s EBITDA jumped roughly 36% year over year to around $6.3 billion in the first nine months of 2017.

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.

ArcelorMittal Price and Consensus

 

ArcelorMittal Price and Consensus | ArcelorMittal Quote

Other Stocks to Consider

Other companies worth considering in the basic materials space include Huntsman Corporation HUN, Kronos Worldwide, Inc. KRO and Air Products and Chemicals, Inc. APD. While Huntsman and Kronos sport a Zacks Rank #1 (Strong Buy), Air Products carries 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 73% over a year.

Kronos has an expected long-term earnings growth of 5%. The stock has gained around 128% over a year.

Air Products has an expected long-term earnings growth of 14.1%. Its shares are up roughly 15% over a year.

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