BUZZ-MS cuts ArcelorMittal as stock's re-rating runs ahead of fundamentals

Morgan Stanley cuts ArcelorMittal MT.AS to "equal-weight" from "overweight," as the stock's re-rating is running ahead of fundamentals

The stock's sharp outperformance has been underpinned by an inflection in the steel maker's spot EBITDA run-rate and expectations of an improved backdrop in Europe, MS says

The "swift re-rating" is disproportionate vs the potential earnings impact from potential Ukraine reconstruction, of which ArcelorMittal is seen as a direct beneficiary, MS adds

Over the past two weeks, the stock has gained about 14.6% in value

The broker prefers to wait for clarity around U.S. tariffs, as well as the outcome of ongoing policy reviews in Europe

The long-term investment case remains, however, intact, MS says, citing robust policy developments in Europe and the promising supply-side reforms in China

It applauds ArcelorMittal's disciplined capital management and strategic focus on decarbonisation investments, alongside its growing presence in regions with strong steel fundamentals like India, Brazil, and North America

It prefers Volestalpine VOES.VI ("overweight") over peers in the steel sector like Salzgitter SZGG.DE ("underweight") and Erdemir EREGL.IS ("underweight")