ArcelorMittal (MT) Stock Gains on New EU Electrical Steel Tariffs

NEW YORK (TheStreet) -- Shares of ArcelorMittal (MT) were gaining 5.4% to $11.55 on heavy trading volume Thursday after the European Union announced new tariffs on electrical steel from the U.S., Russia, Japan, China, and South Korea.

The European Commission set tariffs as high as 35.9% on grain-oriented flat-rolled electrical steel following a June 2014 complaint from Eurofer, the European steel producers association, according to Reuters.

The new tariffs are provisional pending the outcome of an investigation that's due in the end of November. The duties could continue for five years depending on the outcome.

ArcelorMittal will not be affected by the new tariffs as it is based in Luxembourg.

About 9.2 million shares of ArcelorMittal were traded by 11:50 a.m. Thursday, above the company's average trading volume of about 6.9 million shares a day.

TheStreet Ratings team rates ARCELORMITTAL SA as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ARCELORMITTAL SA (MT) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ARCELORMITTAL SA has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ARCELORMITTAL SA continued to lose money by earning -$0.61 versus -$1.46 in the prior year. This year, the market expects an improvement in earnings (-$0.11 versus -$0.61).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 18.2%. Since the same quarter one year prior, revenues fell by 13.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, ARCELORMITTAL SA underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for ARCELORMITTAL SA is currently extremely low, coming in at 8.05%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -4.25% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$915.00 million or 94.26% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: MT Ratings Report

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