The Zacks Analyst Blog Highlights: Exelon, Ameren, ArcelorMittal, Companhia Siderurgica Nacional and Gerdau

Zacks

For Immediate Release
 
Chicago, IL – April 29, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Exelon Corporation (EXC-Free Report), Ameren Corp. (AEE-Free Report), ArcelorMittal (MT-Free Report), Companhia Siderurgica Nacional (SID-Free Report)  and Gerdau S.A. (GGB-Free Report).
 
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday’s Analyst Blog:

Can Exelon (EXC) Keep the Earnings Streak Alive?
 
We expect utility major Exelon Corporation (EXC-Free Report) to beat expectations when it reports first-quarter 2014 results on Apr 30, 2014.
 
Why a Likely Positive Surprise?
 
Our proven model does not conclusively show that Exelon is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.
 
Positive Zacks ESP: This is because the Most Accurate estimate stands at 77 cents while the Zacks Consensus Estimate is 72 cents, resulting in +6.94% ESP. This is a meaningful and leading indicator of a likely positive earnings surprise.
 
Zacks #2 Rank (Buy): We note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered while going into an earnings announcement.
 
The combination of Exelon‘s Zacks Rank #2 (Buy) and +6.94% ESP make us confident of a positive earnings beat on Apr 30.
 
What is Driving the Better-than-Expected Earnings?
 
Exelon continues with its steady effort towards improving the existing infrastructure while adding new assets to its portfolio. The company is continuously spending substantial amounts to upgrade aging properties and install smart meters backed by strong financial position. These initiatives will enable Exelon to provide reliable services to its customers.
 
In Dec 2013, the commissions gave approval to Exelon’s two subsidiaries, Commonwealth Edison Company and Baltimore Gas and Electric Company, to raise their respective rate by a part of their actual appeal. Receiving rate hike approvals from the commissions will encourage the company to invest more for infrastructure development projects.
 
In addition, Exelon is engaged in cost-containment initiatives. During fourth-quarter 2013, the company’s total operating expenses decreased 4.3% year over year. Exelon’s steady cost-control efforts will enable it to improve its future margins.
 
Other Stocks to Consider
 
Here is another utility company worth considering as our model shows it has the right combination of elements to post an earnings beat this quarter.
 
Ameren Corp. (AEE-Free Report) has an earnings ESP of +6.25% and carries a Zacks Rank #2 (Buy).
 
ArcelorMittal Slips to Strong Sell
 
Zacks Investment Research downgraded steel giant ArcelorMittal (MT-Free Report) to a Zacks Rank #5 (Strong Sell).
 
Why Downgraded?
 
ArcelorMittal, on Feb 7, posted a net loss of $1.2 billion or 69 cents per share for the fourth quarter of 2013, narrower than the net loss of $3.8 billion or $2.47 per share a year ago, thanks to lower impairment charges. Adjusted loss, however, was 31 cents per share, wider than the Zacks Consensus Estimate of a loss of 16 cents per share.
 
ArcelorMittal has delivered negative earnings surprises in 3 of the last 4 quarters, with an average negative surprise of 233.76%.
 
While the company's efforts to cut debt, reduce costs and increase steel-making capacity are encouraging, weak steel industry fundamentals and a tough pricing environment remain concerns.
 
ArcelorMittal remained exposed to challenging conditions in Europe, volatility in steel pricing and tough competition. Production ramp-ups by peers, increased domestic imports and an increased Chinese production have led to oversupply in the steel industry, which in turn, is causing a decline in steel prices.
 
Moreover, demand for steel is about 30% below pre-crisis levels in Europe. ArcelorMittal has closed some its operations in the region, given slack demand and the weak European economy. Recovery in the demand environment in the region is expected to be sluggish this year.
 
ArcelorMittal is still seeing soft demand across some of the key end-use markets. The company's Flat Carbon Europe division remains under pressure due to lower average steel selling prices.

Considering the challenging economic conditions, ArcelorMittal reduced its annual dividend payout in 2013. The company intends not to increase the dividend or ramp-up any major steel growth capital expenditure until the medium-term $15 billion net debt target has been achieved and market conditions improve in 2014.
 
For 2014, the Zacks Consensus Estimate for ArcelorMittal has gone down roughly 17.2% to 77 cents per share since fourth-quarter 2013 earnings release. The Zacks Consensus Estimate for 2015 has also declined 15.6% to $1.35 per share.
 
Other Stocks to Consider
 
Other stocks in the steel industry with a favorable Zacks Rank are Companhia Siderurgica Nacional (SID-Free Report) and Gerdau S.A. (GGB-Free Report). While Companhia Siderurgica carries a Zacks Rank #1 (Strong Buy), Gerdau holds a Zacks Rank #2 (Buy).

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