With a closing price of $21.20 on Thursday, shares of ArcelorMittal SA (MT, Financial) were almost flat from the previous trading day.
But upsides are expected as the Luxembourg-based steel producer announced on Thursday it has renewed the agreement with the bank for a $5.5 billion revolving credit facility with maturity on Dec. 21, 2023. The agreement also allows ArcelorMittal to prolong the maturity through the end of 2025.
This agreement will be crucial for the company as it allows it to benefit from robust steel demand despite global overcapacity and the high level of imported steel in various markets.
The agreement will strengthen the balance sheet and sustain ArcelorMittal's plan to create long-term value for shareholders through not only the enhancement of business performance, but also through acquisitions.
Regarding the enhancement of business performance, third-quarter results show a nearly 42% year-over-year increase in net earnings before interest, taxes, depreciation and amortization to $2.7 billion, driven by higher average steel prices.
In April, the company acquired Votorantim Group, an industrial conglomerate operating in Latin America. The combination of ArcelorMittal Brazil’s and Votorantim’s long steel businesses strengthens the company's flat, long and tubular operations in Central and South America.
The company also aims to rapidly improve operations of Ilva S.p.A., an Italian steelworks company with an annual sales turnover of approximately $2.3 billion.
In addition, ArcelorMittal Group has won the bid for Essar Steel. The purchase of the Indian steel manufacturer will provide the company with the opportunity to expand its presence in Asia.
All these acquisitions will increase the annual sales turnover of ArcelorMittal Group, which came in at $68.7 billion in 2017.
As a result of these initiatives, the analysts' recommendation rating is 1.5 out of 5, indicating a buy.
The analysts have established an average target price of $42.13 per share, reflecting nearly 100% upside from the current market valuation.
If analysts are right, this will result in a significant correction of ArcelorMittal's share price since the stock has performed poorly over the last 12 months of trading through Thursday.
The closing share price of $21.20 on Thursday is below the 50-, 100- and 200-day simple moving average lines. The stock tumbled 36% for the 52 weeks through Dec. 20.
ArcelorMittal has a market capitalization of about $22.31 billion, a price-book ratio of 0.57 versus an industry median of 0.99, a price-sales ratio of 0.31 versus an industry median of 0.47 and a price-earnings ratio of 4.61 compared to an industry median of 11.68.
The forward dividend yield is 0.47% versus an industry median of 2.89%.
The 52-week range is $20.90 to $37.50.
Disclosure: I have no positions in any securities mentioned in this article.
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