Updated Research Report on ArcelorMittal - Analyst Blog

On Apr 14, we issued an updated research report on steel maker ArcelorMittal MT. While the company's efforts to cut debt, reduce costs and increase steel-making capacity are encouraging, weak steel industry fundamentals and a tough pricing environment remain concerns.

The steel giant posted narrower loss in the fourth quarter of 2013, reported on Feb 7, thanks to lower impairment charges. Adjusted loss, however, was higher than the Zacks Consensus Estimate. Revenues rose year over year but missed expectations.

ArcelorMittal has missed earnings estimates in three of the trailing four quarters by big margins with an average negative surprise of roughly 234%. Estimates for the company have declined over the past month. Zacks Consensus Estimates for 2014 and 2015 have decreased 6.5% and 1.4%, respectively, over the same period.

ArcelorMittal remains exposed to challenging conditions in Europe, volatility in steel pricing and tough competition. Increased domestic imports, production ramp ups by peers and higher Chinese production have led to oversupply in the steel industry, which in turn, is causing a decline in steel prices.

Moreover, demand for steel still remains weak in Europe. Steel demand fell in Europe in 2013 and is currently roughly 30% below pre-crisis levels.

ArcelorMittal is still seeing soft demand across some of the key end-use markets. The company's Flat Carbon Europe division remains under pressure due to lower average steel selling prices.

ArcelorMittal has closed some its operations in Europe due to slack demand and weak economic conditions. Recovery in the demand environment is expected to be sluggish in the region this year.

Other Stocks to Consider

Other companies in the steel and related industries with favorable Zacks Rank include NN Inc. NNBR, Century Aluminum Co. CENX and NSK Ltd. (NPSKY). While NN holds a Zacks Rank #1 (Strong Buy), both Century Aluminum and NSK retain a Zacks Rank #2 (Buy).