S&P/ASX 200 Index (ASX: XJO) stock BlueScope Steel Ltd (ASX: BSL) has had a strong run so far in 2025.
And according to PAC Partners' James Nicolaou, BlueScope is well-placed to keep outperforming into 2026 (courtesy of The Bull).
In late morning trade on Friday, shares in the painted and coated steel products manufacturer are down 0.7%, changing hands for $23.05 apiece.
That sees BlueScope Steel commanding a market cap of $10.1 billion.
And it puts the ASX 200 stock up 22.5% year to date.
Atop those share price gains, BlueScope also pays two fully franked dividends a year. The stock currently trades on a 2.6% fully franked trailing dividend yield.
Now here's why PAC Partners' Nicolaou has a bullish outlook for the company in the year ahead.
"The steel maker generates reliable free cash flow," said Nicolaou, citing the first reason this ASX 200 stock is a buy.
The second reason he's bullish on BlueScope Steel is its earnings growth potential.
"Steel spreads are improving, particularly in North America where company expansion should generate earnings growth in the years ahead," Nicolaou said.
Then there's the company's coated products division.
"Higher margin coated products should lead to a market re-rating," he noted.
As for the fourth reason, this $10 billion ASX 200 stock could keep outperforming into 2026. Nicolaou said:
The shares have been recently enjoying favourable momentum, rising from $19.80 on April 9 to trade at $23.93 on May 1. Appealing fundamentals provide a brighter outlook.
The last price-sensitive news released by the ASX 200 stock was its half-year results, reported on 17 February.
It was a tough half-year for the company, with underlying earnings before interest and tax (EBIT) down 57% year over year to $309 million.
BlueScope Steel CEO Mark Vassella noted this was "a profitable result despite the depressed spread environment in which it was delivered, which highlights the need for business model resilience".
Vassella added:
While an 8.1% return on invested capital is not at the level we would like to see, it is a solid result in this climate of soft steel spreads in Asia and the US and soft demand conditions for our operations outside the US.
Importantly, this shows the business is in a much stronger place than a decade ago, and with the actions being taken to bolster near-term performance, the company is well positioned to benefit from a recovery in these key external earnings drivers.
With the BlueScope board also announcing the extension of its $240 million share buyback program atop a boosted interim dividend, the ASX 200 stock closed up 13.0% on the day.
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