ArcelorMittal Stock: Much Improved And Undervalued, But Sentiment Is Key To Another Run

 

I’ve been surprised by how well steel prices have held up this year. I expected more capacity restarts, but instead the industry has been shockingly disciplined, leading to quarterly results for ArcelorMittal (MT) that have exceeded some entire years from an EBITDA perspective. Better still, management continues to build confidence in the “it’s different this time” bull angle, as capex plans look restrained and targeted toward value-added capabilities and decarbonization, setting the stage for potentially huge returns of capital to shareholders.

I wasn’t that bullish on ArcelorMittal in my last write-up, though I did say, “I can see upside to the low-to-mid-$30’s on a “stronger for longer” steel market,” and that’s what has happened. By the same token, steel names I preferred more like Steel Dynamics (STLD) and Ternium (TX) (which I own) have done even better, so I don’t exactly regret my position that ArcelorMittal wasn’t the best idea at the time.

A lot of names in the steel space do look too cheap now, even with expectations of a downturn from 2022-2024 in place, and ArcelorMittal is no exception. It’s not hard to argue for a starting fair value at $35/ADR, and you can go into the mid-$40s without much difficulty. Sentiment, then, is a bigger concern now, as the market seems to be moving on from the steel story, and it remains to be seen if that stronger for longer story can drive another run in the share price.

 

Read more here: 

ArcelorMittal Stock: Much Improved And Undervalued, But Sentiment Is Key To Another Run