Arcelormittal: Barclays Downgrades Equal-Weight to Overweight Recommendation

Arcelormittal: Barclays Downgrades Equal-Weight to Overweight Recommendation

Barclays has downgraded ArcelorMittal (MT) to Equal Weight from Overweight, with an unchanged price target of EUR 27. The financial services firm cited concerns over European steel stock valuations, which are at a five-year high relative to spot hot-rolled coil, and potential risks from tariff costs. Barclays noted that the recent share price rally has fully priced in the company’s positive outlook, and they are now starting to see a potential destock cycle emerging into the current deflationary environment [1].

ArcelorMittal's shares have experienced significant growth, rising 41% over the past year and 44% in the past six months alone, approaching its 52-week high of $34.90. Despite this strong performance, Barclays believes the current valuation reflects the company’s solid cash generation and medium-term earnings potential. However, the bank highlighted growing risks around tariff costs, particularly with 50% S232 tariffs, which have not yet catalyzed a domestic price reaction [2].

The downgrade comes after a series of upgrades and downgrades for ArcelorMittal. In August 2024, Barclays upgraded the company from Equal Weight to Overweight, reflecting a decline in share prices and spreads. Now, the firm has reversed this stance, noting that the recent share price rally has run ahead of fundamentals [3].

ArcelorMittal maintains a healthy financial position with a current ratio of 1.35 and a conservative debt-to-equity ratio of 0.24. 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. 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 [4].

In other recent news, Deutsche Bank has raised its price target for ArcelorMittal to EUR 31.00, 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 [5].

Barclays' cautious stance on European steelmakers reflects broader concerns about softening demand, limited trade policy support, and stretched valuations. The bank pointed to ongoing risks from open import arbitrage, weakening pricing trends, and lingering uncertainty around trade policy support. It retained a Neutral view on the European Metals & Mining sector overall, noting that trade measures announced earlier in the year were slightly disappointing [6].

References:
[1] https://www.tipranks.com/news/the-fly/arcelormittal-downgraded-to-equal-weight-from-overweight-at-barclays-thefly
[2] https://finance.yahoo.com/quote/MT/analysis/
[3] https://www.investing.com/news/analyst-ratings/arcelormittal-stock-rating-downgraded-by-barclays-after-41-rally-93CH-4136981
[4] https://www.investing.com/news/stock-market-news/barclays-turns-cautious-on-european-steel-downgrades-arcelormittal-outokumpu-4137142
[5] https://www.investing.com/news/analyst-ratings/arcelormittal-stock-rating-downgraded-by-barclays-after-41-rally-93CH-4136981