ArcelorMittal (MT) Stock Gains After Analyst Upgrade

NEW YORK (TheStreet) -- Shares of ArcelorMittal (MT) were gaining 2.9% to $11.92 Friday following an upgrade from Bank of America/Merrill Lynch.

The analyst firm upgraded the steel producer to "buy" from "neutral," setting a price target of 12.50 euros, according to Benzinga.

Bank of America/Merrill Lynch analysts expect ArcelorMittal's second quarter earnings to be sequentially stable despite the company's predicted decline in mining earnings due to cost cuts and increased shipments. Those cuts will likely result in slower earnings growth in the second half of the year.

"We also think growing trade protectionism in Europe is a positive catalyst," the analysts said, adding that global challengers for steel are "very well understood by investors."

The analysts continued, "ArcelorMittal gives leverage to the unfolding margin recovery story in European steel and we think valuation is supportive."

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

More from Markets

Replay: Jim Cramer on Tariffs, the Market Rally, Caterpillar and Micron

Replay: Jim Cramer on Tariffs, the Market Rally, Caterpillar and Micron

Video: When Planning for Retirement, Don't Underestimate Your Life Span

Video: When Planning for Retirement, Don't Underestimate Your Life Span

Video: Here's What May Come Next for Theranos Founder and CEO Elizabeth Holmes

Video: Here's What May Come Next for Theranos Founder and CEO Elizabeth Holmes

Charlie Gasparino Says GE Is Reportedly Looking to Slash Its Dividend Again

Charlie Gasparino Says GE Is Reportedly Looking to Slash Its Dividend Again

GE Confirms $11.1 Billion Transportation Merger With Wabtec

GE Confirms $11.1 Billion Transportation Merger With Wabtec