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ArcelorMittal Poised on Debt Cuts, Action 2020 Initiatives

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We issued an updated research report on steel giant ArcelorMittalMT on Nov 22.

ArcelorMittal logged a net income of $1,205 million or $1.18 per share in third-quarter 2017, up from net earnings of $680 million or 67 cents recorded a year ago. Earnings per share topped the Zacks Consensus Estimate of 86 cents.

Revenues went up 21.5% year over year to $17,639 million in the quarter on the back of higher average steel selling prices, higher steel shipments, higher market-priced iron ore shipments and higher seaborne iron ore prices. Sales however, trailed the Zacks Consensus Estimate of $17,895 million.

ArcelorMittal's shares have moved up 10.8% in the last three months, outperforming the industry 's 1.9% gain.

ArcelorMittal, during third-quarter earnings 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 2.5-3% for 2017.

In the United States, the company sees apparent steel consumption growth of 2-3% in 2017, factoring in higher construction and machinery demand, offset by lower production in the automotive. The company also anticipates 0.5-1.5% growth in apparent steel consumption in Europe. Moreover, apparent steel consumption is forecasted to rise 2-3% in Brazil as sustained weakness in construction is partly offset by modest improvement in consumer confidence and automotive demand. Apparent steel consumption in China is expected to grow 2.5-3.5% for 2017, owing to strength in automotive and machinery.

ArcelorMittal remains focused on reducing debt and lowering costs. The company's net debt declined to $12 billion at the end of third-quarter 2017 from $12.2 billion a year ago, owing to positive free cash flows, leading to lower interest expenses.

ArcelorMittal also remains on track with its cost-reduction actions under Action 2020 program that includes plans to optimize costs and increase steel shipment volumes. The program contributed $900 million to operating results in 2016 and is expected to make a healthy contribution in 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 sync with the company's Action 2020 program that aims to achieve targeted financial improvements for the company by 2020.

The planned acquisition of Ilva S.p.A. in Italy represents another attractive growth opportunity for the company. It will provide an opportunity to expand leadership and product offering in Italy, the second-largest steel producing and consuming market in Europe. The deal is expected to create synergies of €310 million by 2020, excluding impact from volume improvements and fixed cost reductions.

ArcelorMittal Price and Consensus

ArcelorMittal Price and Consensus | ArcelorMittal Quote

Zacks Rank & Stocks to Consider

ArcelorMittal currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Koppers Holdings Inc. KOP , Daqo New Energy Corp. DQ and Kronos Worldwide Inc. KRO . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 stocks here .

Koppers has an expected long-term earnings growth rate of 18%. Its shares have moved up 20.4% year to date.

Daqo New Energy has an expected long-term earnings growth rate of 7%. Its shares have rallied 156.2% year to date.

Kronos Worldwide has an expected long-term earnings growth rate of 5%. Its shares have surged a whopping 141.3% year to date.

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ArcelorMittal (MT): Free Stock Analysis Report

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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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