Will ArcelorMittal Continue to Ride High?



Analysts’ view

Previously in this series, we looked at analysts’ recommendations and target prices for U.S. Steel Corporation (X), AK Steel (AKS), and Nucor (NUE). In this part, we’ll see how analysts rate ArcelorMittal (MT)—the world’s largest steelmaker. ArcelorMittal rose 127% last year. The stock continued its good run in 2017 as well. It rose 11.9% year-to-date until April 7, 2017.

According to consensus estimates compiled by Thomson Reuters, ArcelorMittal has a mean one-year price target of $10.45. It represents 28.2% upside compared to the closing prices on April 7, 2017. Of the seven analysts surveyed by Thomson Reuters, five rated ArcelorMittal stock as a “buy,” while one analyst rated it as a “sell.”

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Being a global steelmaker, ArcelorMittal’s fortunes are closely intertwined with the global steel industry’s health. The company gets almost half of its revenue from Europe. As a result, it’s impacted by economic activity in that region. Despite concerns about Brexit (EWU) (UKX-INDEX) impacting Europe’s economy, the region’s economic growth has been better than expected this year. ArcelorMittal expects the European Union’s apparent steel consumption to increase 0.5%–1.5% year-over-year in 2017.

Leverage ratios

We should also remember that ArcelorMittal managed to bring down its debt levels last year. With manageable debt levels, the company could look at growth—especially acquiring troubled assets. The recent downward correction in iron ore prices is negative for ArcelorMittal. Lower iron ore prices might pressure steel prices as well.

ArcelorMittal is scheduled to release its 1Q17 earnings on May 12. In our upcoming series, we’ll discuss what analysts project for ArcelorMittal’s 1Q17 earnings. Read China or Trump: What Could Drive Steel Companies in 2017? to explore recent steel industry indicators.

You can also visit Market Realist’s Steel page for ongoing updates on the steel industry.


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