Arcelor: Going for the goal
Fortunately for ArcelorMittal (ADR) (NYSE:MT), like Nucor, it has made a big investment in the future. In Arcelor’s case though, this has to do with a big event: the 2014 FIFA World Cup. When the crowds converge on Brazil for the big soccer tournament, they will be sitting in stadiums and using public transportation that will be 50% built with Arcelor steel. In addition to building new stadiums, Arcelor built secure fences that the company says can’t be scaled or cut through (probably will come in handy after a fortnight of protests this year).
After the World Cup is over though, ArcelorMittal (ADR) (NYSE:MT) will still have a significant presence in the country. The company is also investing money in training Brazil’s masons, builders, and steelworkers with specially designed “truck schools” that will travel the country teaching essential skills to help reduce unemployment. This will help the company stay relevant in the country after the big moment in the sun ends, but with a still growing country that will need steel for its future infrastructure, there will be a “first-mover” advantage that can be had for Arcelor if they play their cards right.
Steel: A cold market
Regardless of the various positive things I’ve said about a couple of these companies, the reality is that steel is still a bearish industry. Nucor may be the better of the three stocks thanks to a low P/E of around 12 and a fairly decent 3.4% dividend yield, but with a low profit margin of around 2.5%, it is a company that isn’t immune to the perils of the steel industry. Likewise, ArcelorMittal (ADR) (NYSE:MT) is just starting to turn a profit, since it has no trailing P/E, and will operate with profit margins at -5.1%, owing to a 13% decrease in quarterly revenue growth. It may see a turnaround during 2014 thanks to its Brazillian investments, but for now it’s not a solid investment opportunity.
U.S. Steel isn’t much better either. Illustrious history aside, it isn’t worth the risk to get it on your spreadsheet, as the company is barely breaking even with a 0.1% profit margin and 11% decrease in quarterly revenue. It may have a cheap forward P/E of 14, but there are reasons why it is a constant sell by many analysts. The time to buy it was in 1901, and the time to sell it was 1951. Steel may have been born by Carnegie’s colossus, but its offspring are taking over.
The article A Financial Salute to America: Part II – Steel City originally appeared on Fool.com and is written by John McKenna.
John McKenna has no position in any stocks mentioned. The Motley Fool recommends Nucor. The Motley Fool owns shares of ArcelorMittal. John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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