The shares of popular iron ore and steel manufacturer Cleveland-Cliffs Inc. (CLF) in Cleveland, Ohio, have gained roughly 70% in price year-to-date, capitalizing on growing investor optimism about the steel industry. Also, the company was caught up in the meme craze. As North America’s largest flat-rolled steel producer, CLF has been trying to achieve its zero net debt goal using its free cash flow, and hopes to benefit significantly from the Senate’s recent passage of a bipartisan infrastructure bill.
However, the company’s weaker-than-expected second-quarter earnings, amid a favorable industry backdrop, and with the potential impact of China’s slowing recovery on the metals and mining industry, the stock to suffer a price decline in the near term.
In contrast, we think its peers, Nucor Corporation (NUE), Companhia Siderúrgica Nacional (SID), Aperam S.A. (APEMY), and Acerinox, S.A. (ANIOY), are well-positioned to offset the pressure created on the industry by macro issues in China and benefit from the infrastructure bill. So, we think these stocks are better investments than CLF now.
Nucor Corporation (NUE)
NUE, in Charlotte, N.C., manufactures and sells steel and steel products. The company operates through three segments—Steel Mills; Steel Products; and Raw Materials. It also produces ferrous and nonferrous metals and brokers ferrous and nonferrous metals, pig iron, hot briquetted iron (HBI), and galvanized sheet steel. Its products are sold by its in-house sales force and internal distribution and trading companies.
On August 23, NUE acquired Hannibal Industries, Inc., a leading national provider of steel racking solutions, for a cash purchase price of $370 million. Adding steel racking solutions to its product portfolio expands NUE’s ability to serve its customers in the fast-growing warehouse and distribution market and further complements its current product capabilities.
NUE completed the acquisition of Cornerstone Building Brands’ insulated metal panels (IMP) business for a cash purchase price of approximately $1 billion on August 9. Also, the company has added Cornerstone Building’s CENTRIA and Metl-Span brands to the newly formed Insulated Panel Group, which already includes NUE’s existing IMP business, TrueCore. This acquisition will enable NUE to provide a full range of products to service high-end architectural applications and the quickly expanding cold storage and warehousing markets.
NUE’s net sales for its fiscal second quarter ended July 3, 2021, came in at $8.79 billion, representing a 103.1% year-over-year improvement. The company’s EBIT has been reported at $2.03 billion for the quarter, up 1018.8% from the prior-year period. While its net earnings increased 1080.2% year-over-year to $1.57 billion, its EPS increased 1300% year-over-year to $5.04. As of July 3, 2021, the company had $2.72 billion in cash and cash equivalents.
A $6.47 consensus EPS estimate for the current quarter, ending September 30, 2021, represents an 889.6% year-over-year improvement. NUE surpassed consensus EPS estimates in each of the trailing four quarters. The $9.79 billion consensus revenue estimate for the current quarter represents a 98.8% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 27.4% rate per annum over the next five years. The stock has gained 167.8% in price over the past year and 30.7% over the past month. It closed yesterday’s trading session at $119.96.
NUE’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Growth and Momentum, and a B grade for Quality. Click here to see the additional ratings for NUE’s Stability, Sentiment, and Value.
Of the 34 stocks in the A-rated Steel industry, NUE is ranked #22.
Companhia Siderúrgica Nacional (SID)
Headquartered in Sao Paulo, Brazil, SID is a steel company that operates mines, an integrated steel mill, service centers, ports, and railroads. The company operates through five segments: Steel; mining; cement; logistics; and energy. It produces primarily carbon steel and various steel products for the distribution, packaging, automotive, home appliance, and construction industries.
On May 12, 2021, SID’s CSN Mineração iron ore company signed a $350 million, 12-year term export prepayment agreement with a group of banks in Tokyo. This operation has credit insurance from Nippon Export and Investment Insurance. It aims to support CSN Mineração in its projects to improve and expand its Casa de Pedra mine, with the goal of guaranteeing the continuity of the supply of high-quality iron ore to its long-term Japanese customers and the market in general.
For the fiscal second quarter, ended June 30, 2021, SID’s net sales revenue increased 147.4% year-over-year to R$15.39 billion ($2.95 billion). The company’s gross profit came in at R$8.28 billion ($1.59 billion), representing a 349.4% increase from the prior-year period. Its operating income was R$7.11 billion ($1.36 billion) for the quarter, representing a 1184.8% year-over-year improvement. SID’s net income came in at R$5.51 billion ($1.06 billion), up 1136.3% from the prior-year period. As of June 30, 2021, the company had cash and cash equivalents of R$21.76 billion ($4.15 billion).
Analysts expect SID’s EPS to improve 453.9% in the current quarter, ending September 30, 2021, to $0.77. Analysts expect its revenue to be $3.17 billion for the current quarter, representing a 104.3% rise year-over-year. Its EPS is expected to grow at a 3.9% rate per annum over the next five years.
The stock has gained 184.8% over the past year and 7.3% over the past month. It ended yesterday’s trading session at $7.21.
SID’s POWR Ratings reflect its solid prospects. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system.
SID has an A grade for Momentum and Quality, and a B grade for Growth. In addition to the POWR Ratings grades we’ve just highlighted, one can see SID’s ratings for Value, Stability, and Sentiment here.
SID is ranked #9 in the Steel industry.
Aperam S.A. (APEMY)
Based in Luxembourg, APEMY is focused on producing stainless and specialty steels, specialty products, including grain-oriented (GO) and non-grain-oriented (NGO) electrical steels and specialty alloys worldwide. The company serves automotive, construction, catering, medicine, oil and gas, aerospace, industrial processes, and electronics and electrical engineering industries.
On May 6, 2021, APEMY signed a share purchase agreement with Franz Haniel & Cie. GmbH to acquire its ELG business–which is engaged in the recycle and trade of stainless-steel scrap and processed metal alloys–for €357 million (419.75 million). ELG acquisition and investing in sustainable recycling should enable APEMY to expand into the supply of raw materials and further improve its leading environmental footprint and CO2 reduction targets.
APEMY’s sales came in at €1.27 billion ($1.50 billion) for its fiscal second quarter, ended June 30, 2021, representing a 55.5% year-over-year rise. The company’s operating income has been reported at €235 million ($276.36 million), up 1578.6% from the prior-year period. While its net income increased 914.3% year-over-year to €213 million ($250.49 million), its EPS increased 885.2% to €2.66 ($3.13). As of June 30, 2021, the company had €417 million ($490.30 million) in cash and cash equivalents.
A $1.55 billion consensus revenue estimate for the current quarter, ending September 30, 2021, represents a 57.2% gain from the prior-year period. The stock has gained 100.1% in price over the past year and 3.4% over the past month. It closed yesterday’s trading session at $60.76.
APEMY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock has an A grade for Momentum, and a B grade for Growth, Sentiment, and Quality. We also have graded APEMY for Value and Stability. Click here to access all APEMY’s ratings.
APEMY is ranked #6 in the Steel industry.
Acerinox, S.A. (ANIOY)
Based in Madrid, Spain, ANIOLY manufactures, alloys, and distributes flat, long, hot, and cold-rolled stainless-steel products worldwide.
On February 12, 2021, ANIOY and Banco Sabadell, a Spanish financial services company, agreed on an €80 million ($94.06 million) ‘green’ loan linked to their sustainable criteria. This should enable ANIOY to achieve its emission reduction targets.
ANIOY’s net sales for its fiscal second quarter ended June 30, 2021, increased 52.6% year-over-year to €1.63 billion ($1.92 billion). The company’s adjusted EBITDA has been reported at €201 million ($236.60 million) for the quarter, representing a 185.9% year-over-year improvement. Its net income came in at €125 million ($147.14 million), compared to a loss of €26 million (30.60 million) in the prior-year period. The company had cash and cash equivalents of €991.01 million ($1.17 billion) as of June 30, 2021.
ANIOY surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect ANIOY’s revenue to be $2.15 billion for the current quarter, ending September 30, 2021, representing a 62.5% rise from the prior-year period. ANIOY has gained 51.1% over the past year and 10% over the past month. It closed yesterday’s trading session at $6.69.
It’s no surprise that ANIOY has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The stock has an A grade for Momentum, and a B grade for Growth, Sentiment, Value, and Quality. Click here to see the additional ratings for ANIOY’s Stability.
ANIOY is ranked #1 in the Steel industry.
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NUE shares were trading at $120.10 per share on Thursday afternoon, up $0.14 (+0.12%). Year-to-date, NUE has gained 127.93%, versus a 20.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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