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ArcelorMittal (MT) Up 43% YTD: What's Driving the Stock?

ArcelorMittalMT - the biggest steel producer on the planet - has seen its shares shoot up roughly 43% year to date. The company has also significantly outperformed its industry 's gain of around 15% to over the same time frame.

ArcelorMittal, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $32.1 billion and average volume of shares traded in the last three months is around 3,992.1K. The company has an expected long-term earnings per share growth of 11.2%.

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

What's Driving MT?

Forecast-topping earnings performance, improving global steel market conditions and the company's internal initiatives have contributed to a rally in ArcelorMittal's shares this year.

ArcelorMittal delivered solid results in third-quarter 2017. The company saw its profits zoom around 77% year over year to roughly $1.2 billion or $1.18 per share in the quarter. Earnings per share also topped the Zacks Consensus Estimate of 86 cents.

In fact, the company has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of around 42%.

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.

Steel market conditions have improved lately, driven by favorable developments on steel trade cases across the United States and Europe in the recent past, providing reprieve to steel producers including ArcelorMittal. The overall demand fundamentals for steel also remain healthy. ArcelorMittal also gained from higher steel prices in the third quarter, driven by strong pricing in Europe - the company's biggest market.

ArcelorMittal also remains focused on implementing strategic measures under its Action 2020 plan to drive profitability. The Action 2020 plan, a strategic roadmap for each of the company's key segments, 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.

ArcelorMittal remains on track with its cost-reduction actions under the Action 2020 program. The program contributed $900 million to operating results in 2016 and is expected to make a healthy contribution in 2017.

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.

Moreover, ArcelorMittal remains highly focused on deleveraging its balance sheet. It has cut net debt by nearly 45% over the past five years. The company's net debt fell by $0.2 billion year over year in the third quarter. ArcelorMittal's sustained commitment to cut debt is leading to lower net interest expenses.

ArcelorMittal Price and Consensus

ArcelorMittal Price and Consensus | ArcelorMittal Quote

Some Other Stocks to Consider

Better-ranked companies in the basic materials space include Westlake Chemical Corporation WLK , Kraton Corporation KRA and Kronos Worldwide, Inc. KRO , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Westlake has an expected long-term earnings growth of 10.6%. Its shares are up roughly 78% year to date.

Kraton has an expected earnings growth of 25.4% for the current year. The stock has gained around 63% year to date.

Kronos has an expected long-term earnings growth of 5%. Its shares are up roughly 111% year to date.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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