Despite seasonally lower demand and declining iron ore prices, ArcelorMittal (MT, Financial) posted impressive results. The company came up with a strong operating performance, delivering sequential improvement in earnings on a year-over-year basis. Arcelor is now focusing on other initiatives to improve its performance. The company is expecting a lot from the European market, which is showing positive signs. Also, ArcelorMittal is anticipating a turnaround in its ACIS business.
Doing well despite a downturn
Tthe overall market is on a downtrend, yet ArcelorMittal is confident of a good financial performance in the coming quarters. Europe stands to be the most potential market for the company as it has not seen any signs of a slowdown up to now. In addition, the order entry for the flat products in Europe is running between 5% to 10% which is a good sign.
Moving further, ArcelorMittal is focused on margin improvement. It is advancing better towards this through many innovative steps. The main focus of the company stays on improving the shipments which will help it to supply the growing demand. It is focusing on optimizing its footprints in Europe. ACIS business is also growing. The segment had been under pressure in the past due to certain challenges, but now the company is seeing improvement in this segment which is expected to be in full force in the coming quarters.
Automotive growth in focus
ArcelorMittal is seeing bright signs from the automotive segment as well. With this it is trying to develop its core franchise business. Being a market leader in the automotive segment it is focusing on ramping up the demand of steel. As the economy is recovering it is expected to lower the interest rates which will improve the demand of automobiles, driving the demand of steel in the future. This will be growing opportunity for the company which it is trying to capture in time.
Steel demand is expected to rise in the U.S. Many auto makers are in huge demand for steel for its new products. Chevrolet has recently launched its toughnology concept in 2015 under its Silverado light truck. The company is in good need of advanced high strength steel. With such a growing demand, ArcelorMittal is seeing good growth opportunities, and it is investing aggressively in R&D to continue to produce these products that are in limelight.
While in Europe, the company is concerned about the weak GDP growth. But it is cautious about this situation and is expecting a gradual improvement in European growth. However, ArcelorMittal is also seeing decline in steel demand in Brazil due to recession and other political crunches. The conditions are now stabilizing, but it is slow. It will take some time to return to its full form.
Conclusion
Moving on to the fundamentals now, the company is still making losses and is narrowing it. Its forward P/E of 12.49 shows earnings improvement in the near term. But the stock can be a strong long term holding as its earnings are growing at a CAGR of 75.10% for the next five years which is better than the industry average of 58.25%. Considering all these facts and statistics it can be seen that the stock is growing and with the improvement in the market it will be a good profitable stock in the future as well. I suggest investors include ArcelorMittal in their portfolio.
