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Consensus Estimates: Analyzing ArcelorMittal’s Upside

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Consensus estimates

Previously, we looked at analysts’ rating and target prices for U.S. Steel Corporation (X) and AK Steel (AKS). In this part, we’ll see how analysts rate ArcelorMittal (MT), the world’s leading steelmaker (XME).

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Target price

According to consensus estimates compiled by Thomson Reuters, ArcelorMittal has a mean one-year price target of $10.18. It represents 17.3% upside compared to the closing prices on March 14, 2017. Of the seven analysts surveyed by Thomson Reuters, four rated ArcelorMittal stock as a “buy,” while one analyst rated it as a “sell.” The remaining two analysts rated ArcelorMittal as a “hold.

Outlook

ArcelorMittal’s management sounded optimistic on the company’s outlook during its 4Q16 earnings call. ArcelorMittal expects the European Union’s ASC (apparent steel consumption) to increase 0.5%–1.5% YoY (year-over-year) in 2017. Europe is ArcelorMittal’s biggest market. It accounts for ~50% of the company’s revenues.

ArcelorMittal also sounded positive on steel demand in the North American Free Trade Agreement. It expects the region’s ASC to increase 3%–4% YoY in 2017. Along with more demand from the construction sector, ArcelorMittal also expects inventory destocking activity to end. It had a negative impact on US steel demand for the last two years.

ArcelorMittal expects ASC growth of 3%–4% YoY in Brazil. The region saw a contraction in steel demand over the last few years as the Brazilian economy fell into a recession.

Higher steel and iron ore prices bode well for ArcelorMittal given the company’s backward integrated operations.

In the next part of this series, we’ll see how analysts rate Nucor (NUE).

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