Commodities stocks have been rallying over the past few months as an economic recovery gains steam. Growing demand for commodities such as iron ore and steel, among others, has driven increasing prices. In fact, some market observers speculate that iron ore prices will hit $200 per ton, surpassing the record $194 level achieved more than a decade ago. The ramping up of steel production in China should drive iron ore prices way up given the inability of miners to meet the rising demand. And President Joe Biden’s proposed ‘Build Back Better’ infrastructure plan is further expected to boost demand for commodities.
Keeping these factors in mind, we think it could be wise to bet on the shares of established commodities companies Nucor Corporation (NUE), Aluminum Corporation of China Limited (ACH), and Steel Dynamics, Inc. (STLD). They have the potential to capitalize on the rising prices. The shares of these companies rallied more than 15% in price last week and they should keep climbing.
Nucor Corporation (NUE)
NUE manufactures and sells steel and steel products. It operates through three segments: steel mills, steel products, and raw materials. The company also produces direct reduced iron (DRI) for use in its steel mills. It offers its products through its in-house sales forces and internal distribution and trading companies.
On May 5, NUE’s board of directors approved a project to upgrade its engineered bar mill in Nebraska to better serve the automotive market and continue to meet its customers’ demand for the highest quality products. This project is expected to help NUE establish itself as a leader in the engineered bar and rod domain.
NUE announced in March 2021 that it will build its new tube mill on the site of its Nucor Steel Gallatin sheet mill in Kentucky to take advantage of the investments it has made to expand capacity of the Gallatin mill and add a galvanizing line. This should help the company increase its production at a rapid pace.
The company’s net sales increased 33% sequentially to $7.02 billion for the first quarter, ended April 3. Its average sales price per ton grew 25% year-over-year. NUE’s net earnings increased 1,716% year-over-year to $942.40 million, while its adjusted EPS increased 4,328.6% year-over-year to $3.10.
For the current quarter, ending June 30, analysts expect NUE’s EPS and revenue to increase 954.1% and 79.7%, respectively, year-over-year to $3.9 and $7.93 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 140.1% over the past year to close yesterday’s trading session at $101.30. Moreover, it soared 20.3% last week.
NUE’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth, and a B grade for Sentiment, Momentum and Quality. Within the A-rated Steel industry, NUE is ranked #13 of 34 stocks.
To see the additional POWR Ratings for NUE (Stability and Value), click here.
Aluminum Corporation of China Limited (ACH)
Headquartered in Beijing, China, ACH manufactures and sells alumina, primary aluminum, and energy products. It operates through four segments: Alumina, Primary Aluminum, Trading, and Energy. The company also acquires, manufactures, and distributes bauxite mines and limestone ore, and provides engineering project management and research and development services also.
Amid good market prospects and high aluminum prices, the company’s total profits increased eightfold year-over-year to 2 billion yuan ($311.1 million) for the first quarter ended March 31, 2020. Its operating income grew 13.9% year-over-year to 52.61 billion yuan ($8.2 billion) Also, its net profit increased 11-fold year-over-year to 1.55 billion yuan ($233.3billion).
Analysts expect ACH’s revenue to increase 5.3% year-over-year to $7.70 billion for the quarter ending September 30. The stock soared 12.5% last week to close yesterday’s trading session at $16.37. It has gained 88.6% year-to-date.
It’s no surprise that ACH has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Growth and Sentiment, and a B grade for Momentum and Value.
Steel Dynamics, Inc. (STLD)
Together with its subsidiaries, STLD operates as a steel producer and metal recycler in the United States. It operates through three segments: steel operations, metals recycling operations, steel fabrication operations and other. The company also exports its products.
The company provided a strategic update on April 15 regarding its ongoing and new flat roll steel growth initiatives. It expects to add two additional value-added flat roll coating lines to provide its Sinton Texas EAF Flat Roll Steel Mill with similar diversification and higher-margin product capabilities as its Butler and Columbus Flat Roll Steel divisions. This should help ramp up its productivity.
STLD’s net sales increased 37.6% year-over-year to $3.54 billion for the first quarter ended March 31. Its operating income grew 117.1% year-over-year to $594.20 million, while its net income increased 129.9% year-over-year to $438.75 million. The company’s EPS increased 130.7% year-over-year to $2.04.
For the current quarter, ending June 30, 2021, analysts expect STLD’s EPS and revenue to increase 517% and 88.2%, respectively, year-over-year to $2.9 and $3.94 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock gained 15.4% last week to close yesterday’s trading session at $63.98. It has surged 88.7% over the past six months.
STLD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has an A grade for Growth, and a B grade for Momentum and Sentiment.
We have also graded STLD for Value, Quality and Stability. Click here to access all STLD’s ratings. It is ranked #21 in the Steel industry.
Want More Great Investing Ideas?
NUE shares were trading at $100.97 per share on Tuesday afternoon, down $0.33 (-0.33%). Year-to-date, NUE has gained 90.81%, versus a 11.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|NUE||Get Rating||Get Rating||Get Rating|
|ACH||Get Rating||Get Rating||Get Rating|
|STLD||Get Rating||Get Rating||Get Rating|