ArcelorMittal S.A. MT recently announced that it has signed a definitive equity purchase agreement with Nippon Steel Corporation ("NSC") to acquire NSC's 50% equity stake in the AM/NS Calvert joint venture (JV). 

The transaction was entered into at NSC's request to address regulatory issues related to its agreed acquisition of US Steel. The deal is contingent on NSC completing its pending acquisition of U.S. Steel, which is subject to numerous regulatory requirements. Per the terms of the agreement, ArcelorMittal will pay $1 consideration for the transaction. In addition, NSC will inject cash and forgive partner loans totaling an estimated $0.9 billion. 

There are no certainties or guarantees that NSC will complete the acquisition of U.S. Steel. If NSC does not complete the buyout, the agreement will not take effect, and the AM/NS Calvert JV will continue. AM/NS Calvert, a JV between ArcelorMittal and NSC, bought Thyssen Krupp USA in February 2014. Calvert is North America's most capable finishing facility, providing high-quality steel solutions to the region's most demanding customers.

Shares of ArcelorMittal have gained 5.1% over the past year against a 2.5% decline of its industry.

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MT, on its second-quarter call, said that it believes that the current market conditions are not sustainable due to China's excess steel production relative to demand, which resulted in very low domestic steel spreads and aggressive exports. Both Europe and the United States are experiencing steel prices below the marginal cost. Nevertheless, the company anticipates higher apparent demand in the second half of 2024 year over year, which was affected by destocking, especially in Europe. With absolute inventory levels remaining low in Europe, the company is optimistic about the potential for restocking activity as real demand begins to recover. MT now projects 2.5-3% growth in global steel consumption, excluding China, for 2024, compared with its prior view of 3-4% growth.

Zacks Rank & Key Picks

MT currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked stocks in the basic materials space include Carpenter Technology Corporation CRS, IAMGOLD Corporation IAG and Centrus Energy Corp. LEU. 

Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). CRS beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 15.9%. The company's shares have soared 149.4% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for IAG’s current-year earnings is pegged at 51 cents, indicating a year-over-year rise of 466.7%. The Zacks Consensus Estimate for IAG's current-year earnings has been going up in the past 30 days. IAG, a Zacks Rank #1 stock, beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 200%. The company's shares have rallied roughly 110.9% in the past year.

The Zacks Consensus Estimate for Centrus’ current-year earnings is pegged at $3.06 per share. LEU, a Zacks Rank #1 stock, beat the consensus estimate in three of the last four quarters while missed once, with the average earnings surprise being 107.1%. LEU has rallied around 12.5% in the past year.

 

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