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Why ArcelorMittal Stock Is Red Hot Today

By Matthew DiLallo - Feb 6, 2020 at 11:41AM

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The steel producer likes what it sees ahead.

What happened

Shares of ArcelorMittal (MT -0.19%) jumped more than 10% by 10:45 a.m. EST on Thursday. Driving up shares of the iron and steel producer were its fourth-quarter results and outlook for what's ahead. 

So what

Market conditions in the steel industry remained challenging during the fourth quarter. Because of that, ArcelorMittal's revenue slumped 15.4% year over year while its net loss widened.

A steel factory.

Image source: Getty Images.

However, the quarter wasn't as bad as analysts expected. Earnings before interest, taxes, depreciation, and amortization (EBITDA), for example, came in a $925 million, which was ahead of expectations of $858 million. Meanwhile, the company ended the year with $9.3 billion of net debt, the lowest level since before the 2006 merger between Arcelor and Mittal. That has the company on track to achieve its targeted net debt level of $7 billion by the end of this year. Once that happens, the company plans to significantly increase its dividend, which currently yields a below-average 1.1%.  

The steel producer also sees signs that the slowdown in demand is starting to stabilize. It expects steel consumption in its core markets to grow this year, including in China, despite that country's near-term headwinds from the coronavirus outbreak. Those improving market conditions should help boost the company's financial results this year. 

Now what

While ArcelorMittal's financial results continued to decline during the fourth quarter, it appears as if market conditions have already bottomed and are about to start bouncing back. That should drive an improvement in the company's financial results, enhanced by its efforts to reduce debt and boost margins through its Action 2020 targets, which should cut its annual costs by $1 billion. The stock could continue rallying if market conditions improve as anticipated and the company delivers on all its 2020 goals.

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