Based in Luxembourg, Luxembourg, ArcelorMittal SA (MT) operates as an integrated steel and mining company in Europe, North and South America, Asia and Africa. The company sells its steel and mining products to automotive, engineering, construction, appliance, energy and machinery customers through a centralized marketing organization and of distributors.
MT has iron ore mining operations in Brazil, Bosnia, Canada, Liberia, Mexico, South Africa and Ukraine, and coal mining operations in Kazakhstan. The stock has a market capitalization of $20.94 billion.
MT’s strong financial position allows it to progress on its strategic objectives and transform its business. “We have made several targeted acquisitions reflecting the evolution of energy and metal inputs needed to manufacture low-carbon steel and are also looking to strengthen our presence in regions that can produce green hydrogen at low cost like Brazil,” said Aditya Mittal, CEO of MT. .
“The long-term outlook for steel demand also remains positive, underpinned by the magnitude of the opportunities associated with the energy transition and continued growth in developing economies,” he added.
On July 28, MT entered into an agreement to acquire Companhia Siderúrgica do Pecém (CSP), a world-class company producing high quality slabs at a globally competitive cost. The acquisition could bring several strategic benefits to MT, including the ability to expand its position in Brazil’s high-growth steel industry and capitalize on significant third-party investment to create clean electricity and hydrogen green in Pecém.
Additionally, the acquisition of CSP could add 3 million tons of high-quality, cost-competitive slab capacity and capture over $50 million in identified synergies, including SG&A, procurement and process optimization.
On July 1, CSP announced the completion of the acquisition of an 80% stake in voestalpine AG (VLPNY) Hot Briquetted Iron (HBI) plant located near Corpus Christi, Texas. The state-of-the-art plant has an annual capacity of two million tons of HBI, a premium, compacted form of direct-reduced iron.
The transaction could improve the company’s ability to supply the high-quality raw materials needed to manufacture low-carbon steel and strengthen its position as a global leader in DRI production.
Shares of MT have gained 12.5% over the past month to close the latest trading session at $24.30.
Here’s what could influence MT’s performance in the coming months:
MT’s sales increased 14.5% year-over-year to $22.14 billion in the first quarter of fiscal 2022 ended March 31, 2022. MT’s operating profit company was $4.50 billion, up 1.4% year-over-year. Its EBITDA increased 2.2% year-on-year to $5.16 billion.
Additionally, the company generated $1.7 billion in free cash flow (FCF) in the second quarter. Its earnings per share were $4.24, an increase of 22.5% over the prior year period.
Consensus Rating and Price Target Indicate Upside Potential
Of the four Wall Street analysts who rated MT, three rated it Buy and one rated it Hold. The 12-month median price target of $42.57 indicates a 76.4% upside potential. Price targets range from a low of $46.00 to a high of $38.00.
MT’s trailing 12-month EBIT margin of 21.85% is 54.5% higher than the industry average of 14.14%. His last 12 months EBITDA margin of 24.85% is 18.1% higher than the industry average of 20.91%. Similarly, the stock’s trailing 12-month net income margin of 19.66% is 116.1% higher than the industry average of 9.10%.
Additionally, MT’s 12-month ROCE, ROTC and ROTA of 34.06%, 19.22% and 17.23% are above the industry averages of 13.39%, 7.59% and 5. 29%, respectively.
In non-GAAP forward P/E terms, MT’s 2.05x is 81.9% below the industry average of 11.32x. The stock’s EV/Forward Sales of 0.35x is 75% below the industry average of 1.39x. Additionally, its forward EV/EBITDA multiple of 1.71 compares to the industry average of 6.21.
Additionally, MT’s futures price/sales multiple of 0.26 compares to the industry average of 1.14. Its forward price/cash flow of 1.90x is 71.5% below the industry average of 9.07x.
POWR ratings are promising
MT’s overall A rating equates to a Strong Buy in our POWR Rankings system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
MT has an A rating for value, in line with its lower-than-industry valuation. Additionally, the stock has a B rating for quality, which is consistent with its above-industry profitability.
MT is ranked #13 out of 32 stocks in the A rating Steel industry.
Beyond what I said above, we also assigned MT ratings for Sentiment, Growth, Momentum, and Stability. Access all MT reviews here.
MT delivered strong first quarter revenue and earnings results. This momentum, coupled with new strategic acquisitions, the ability to generate healthy cash flow and a positive long-term outlook for steel demand, demonstrates the company’s solid positioning.
Given the company’s strong financials, low valuation and high profitability, we think it might be a good idea to invest in the stock now.
How ArcelorMittal SA (MT) works Up to his peers?
MT has an overall POWR rating of A. One might also check out these other steel stocks with an A (Strong Buy) rating: Acerinox, SA (ANOY), voestalpine AF (VLPNY), and Friedman Industries Inc. (FRD).
MT shares were trading at $24.40 per share on Friday afternoon, up $0.26 (+1.08%). Year-to-date, MT is down -22.41%, compared to a -12.57% rise in the benchmark S&P 500 over the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using its fundamental approach to stock analysis, Mangeet seeks to help retail investors understand the underlying factors before making investment decisions. After…