ArcelorMittal (MT), the world’s largest steel producer, is having a somber 2018. It’s fallen 10.9% year-to-date based on its September 5 closing price.
The company gets only about one-quarter of its revenue from NAFTA, with its European operations (VGK) contributing more than half of its sales.
While steel prices have been strong globally, the trade war scare has played heavily on ArcelorMittal. The company’s expansion spree has also been hit by roadblocks. The political change in Italy has delayed ArcelorMittal’s acquisition of Ilva, which could have given it exposure in Italy, Europe’s second-largest steel market. ArcelorMittal’s bid for Essar Steel in India is also tangled up in different issues.
ArcelorMittal reported a strong set of numbers in the second quarter, with its earnings rising to a seven-year high. Nucor (NUE) and Steel Dynamics (STLD) also reported record earnings in the quarter as the Section 232 tariffs lifted US steel prices to multiyear highs.
ArcelorMittal carries a mean consensus price target of 35.32 euros, which represents a 42.2% upside over its September 5 closing price. Overall, analysts are bullish on the stock, and it has received “buy” or higher ratings from 17 analysts. One analyst has given the stock a “hold” rating, while the remaining analyst polled by Thomson Reuters on September 5 has given ArcelorMittal a “sell.”
ArcelorMittal’s valuation also looks attractive. The stock is trading at a 2019 EV-to-EBITDA (enterprise value-to-EBITDA) multiple of 4.24x. The company’s leverage position is also comfortable now, and it carries an investment-grade credit rating.
In the next article, we’ll see how analysts are rating AK Steel (AKS).