Credit Suisse's Market-Moving Call: ArcelorMittal In Midst Of First Upcycle In 5 Years
Credit Suisse upgraded ArcelorMittal SA (ADR) (NYSE: MT) to Outperform from Neutral, saying that the steel company is in the midst of first upcycle in five years.
Analyst Michael Shillaker said he has increased the estimates for Mittal for the second time in a month, saying, "The cycle recovers sharply and our conviction strengthens that this is a real cycle and not just a seasonal uptick."
Shillaker raised his 2016 EBITDA view to $5 billion from $4.4 billion and 2017 EBITDA forecast to $6.8 billion from $6 billion. The analyst also raised the price target to $7.5 from $6.
The analyst noted that the stock has room for material upside, despite recent rally, as EBITDA normalizes back to the $6 billion+ level, and "the stock is still trading at 50pc of its 2012–2015 average (which was a 4 year down cycle of deflation)."
"To get back to the period when the steel price/iron ore price spread was at this level the stock would double," Shillaker noted.
According to Shillaker, the upcoming catalysts for the stock include movement in steel, iron ore and scrap prices moves and the first-quarter results.
On the first quarter results, says there is "some risk the market gets excessively optimistic about imminent upgrade risk, but the outlook should be bullish."
ADRs of ArcelorMittal gained 7.43 percent to $5.57 Wednesday afternoon.
Latest Ratings for MT
|Nov 2016||RBC Capital||Upgrades||Sector Perform||Outperform|
|Nov 2016||Bank of America||Downgrades||Buy||Neutral|
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