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On Friday, JPMorgan analyst Dominic O’Kane updated the firm’s outlook on ArcelorMittal (NYSE:MT:NA) (NYSE: MT), raising the price target to EUR23.50, up from the previous EUR23.00, while maintaining a Neutral rating on the stock. The adjustment follows ArcelorMittal’s strong fourth-quarter financial performance, which saw the company’s EBITDA rise to $1.65 billion, an 8% increase compared to the company-consensus and a 9% increase versus JPMorgan’s estimate (JPMe). According to InvestingPro data, the company maintains a strong financial health score of 2.55 (rated as GOOD), with particularly high marks in price momentum and relative value.
ArcelorMittal’s cash flow exceeded JPMorgan’s expectations, and the company reported a net debt of $5.1 billion, which was considered a beat. On the back of these results, ArcelorMittal’s stock closed with a significant 13% gain. The broader European Steel sector also experienced a robust rally. InvestingPro data shows the stock has delivered an impressive 14.65% return over the past week and is currently trading near its 52-week high of $28.95.
Looking ahead, ArcelorMittal anticipates a rise in apparent steel demand for the fiscal year 2025 compared to the previous year. The company forecasts a worldwide apparent steel demand (excluding China) increase of 2.5% year-over-year in 2025, with specific growth expectations for Europe (0-2%), the USA (1-3%), and India (6-7%). The company has also indicated that currently, steel prices are at a cyclical low. With an attractive EV/EBITDA ratio of 2.86x and trading at just 0.46x book value, InvestingPro analysis suggests the stock is currently undervalued, with 11 additional ProTips available for subscribers.
In light of the fourth-quarter results, JPMorgan has made minor adjustments to its first-quarter 2025 and full-year 2025 EBITDA estimates, with a slight reduction for Q1 and a 3% increase for the full year. JPMorgan’s 2025 EBITDA estimate of $7.6 billion is now 5% above the 28-day Bloomberg consensus.
Despite the price target increase, JPMorgan’s stance remains Neutral, reflecting ongoing uncertainties related to tariffs and potential risks to steel demand. This cautionary outlook is balanced against the substantial rally that took place yesterday, with ArcelorMittal’s shares reaching EUR27.61. The firm also notes that ArcelorMittal trades at 4.1x/4.3x EV/EBITDA for 2025/2026 estimates (JPM base case) and has a free cash flow yield of zero.
In other recent news, ArcelorMittal has seen several developments. Analysts at CFRA have updated the price target for ArcelorMittal, raising it to €26.00 from the previous €23.00, while maintaining a Hold rating on the stock. This follows the company’s Q4 2024 earnings, which saw a 4.6% quarter-over-quarter increase in EBITDA, largely due to improved performance in the Mining segment. However, the full-year EBITDA for 2024 experienced a decline of 19.3% year-over-year, primarily due to negative price-cost effects and repercussions of an illegal blockade at its North American operations.
Additionally, Citi has increased its price target for ArcelorMittal to EUR40.00 from the previous EUR38.00, maintaining a Buy rating. The firm highlighted the growth potential of the Indian steel market, where ArcelorMittal is positioned as the fourth largest flat steel producer. ArcelorMittal is expected to see its volumes grow by an annual rate of 11% leading up to the year 2040, outpacing the Indian market’s growth forecast of 7%.
Furthermore, BofA Securities analyst Patrick Mann upgraded shares of ArcelorMittal from Neutral to Buy, increasing the price target from EUR28.00 to EUR31.00. The upgrade was based on a shift in ArcelorMittal’s earnings, with North America now surpassing Europe as the company’s largest source of EBITDA, accounting for about 28%.
Lastly, ArcelorMittal reported a resilient Q3 performance in its recent earnings call. Despite challenging market conditions, the company maintained a robust EBITDA margin and advanced in its growth projects and decarbonization efforts. The company’s strategic growth projects are expected to add $1.8 billion in EBITDA, with $1 billion in the next two years.
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