Among the analysts surveyed by Thomas Reuters on July 6, nine analysts rate ArcelorMittal (MT) as a “strong buy,” seven analysts rate the stock as a “buy,” one analyst rates the stock as a “hold,” and one analyst rates the stock as a “sell.” The stock has the highest percentage of “buy” ratings among the steel stocks that we’re covering in this series. ArcelorMittal has received a mean consensus target price of 34.7 euros, which represents a 36.3% upside over its closing prices on July 6. U.S. Steel Corporation (X) and AK Steel (AKS) are trading 32.6% and 23.0%, respectively, below their consensus target prices.
On July 6, Macquarie initiated coverage on ArcelorMittal with a “outperform” rating and target price of 30 euros. In June, Moody’s also upgraded ArcelorMittal’s credit rating to “BAA3” with a stable outlook.
Falling leverage ratios
ArcelorMittal’s financial leverage ratios have improved significantly in the last two years due to asset sales, a rights issue, and strong organic cash flows. Now, ArcelorMittal and other companies like Nucor (NUE) and Steel Dynamics (STLD) are looking at growth. However, some of ArcelorMittal’s inorganic growth pursuits haven’t materialized. The company’s proposed acquisition of the Ilva steel plant in Italy has been delayed by the Italian government. ArcelorMittal has bid for the stressed assets of Essar Steel in India. The company has been facing challenges from the other bidder.
Read Why ArcelorMittal is Focusing on Essar Steel to explore how the company could benefit from the acquisition.
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