ArcelorMittal stock rating downgraded by Barclays after 41% rally

Investing.com - Barclays (LON:BARC) downgraded ArcelorMittal (NYSE:MT) from Overweight to Equalweight and set a price target of EUR27.00, citing concerns that the recent share price rally has fully priced in the company’s positive outlook. The $25.4 billion steel giant currently trades at a P/E of 21.28, though InvestingPro analysis suggests the stock remains undervalued based on its proprietary Fair Value model.

The steel giant’s shares have climbed 41% over the past year, with an impressive 44% surge in the past six months alone, approaching its 52-week high of $34.90. While Barclays believes this rally adequately reflects ArcelorMittal’s solid cash generation and medium-term earnings potential, InvestingPro data shows net income is expected to grow this year, with two analysts recently revising their earnings estimates upward. Get access to 12 more exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.

Barclays highlighted growing risks around tariff costs, particularly with 50% S232 tariffs, which have not yet catalyzed a domestic price reaction, creating potential headwinds for the company. The company maintains a healthy financial position with a current ratio of 1.35 and a conservative debt-to-equity ratio of 0.24.

The downgrade represents a reversal from Barclays’ August upgrade, which occurred when share prices and spreads had significantly declined. The firm notes that this trend has now reversed, with ArcelorMittal trading near €30 per share.

At current price levels, Barclays believes ArcelorMittal is pricing in European spreads at approximately €500 per ton, a level that would require both a meaningful recovery in domestic demand and restricted import supply to achieve.

In other recent news, ArcelorMittal’s financial performance has been under the spotlight with several noteworthy updates. KeyBanc maintained its Sector Weight rating on the company, highlighting expectations for higher quarter-over-quarter EBITDA in Q2 2025 due to improved metal margins in Europe. Deutsche Bank (ETR:DBKGn) has raised its price target for ArcelorMittal to EUR31.00, maintaining a Buy rating, and anticipates sequential improvement in Q2 results despite the ongoing impact of U.S. tariffs. S&P Global Ratings upgraded ArcelorMittal’s credit rating to ’BBB/A-2’, citing improved business performance and strategic growth projects. These projects include significant investments in decarbonization and expansion efforts in North America, which have bolstered the company’s global position. The company’s strategic moves, such as the acquisition of a slab factory in Brazil and the commissioning of a new electric arc furnace, are expected to contribute significantly to its EBITDA by 2027. ArcelorMittal’s adjusted EBITDA is projected to improve to approximately $8 billion-$8.2 billion in 2025. Despite challenges such as European market oversupply and U.S. tariff uncertainties, the company remains focused on strengthening its operations and maintaining a stable financial outlook.

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