Many major construction projects were shelved amid the COVID-19 pandemic. While supply chain bottlenecks concerning several basic materials continue to hinder productivity, with the gradual resumption of several construction projects over the past few months, demand for basic materials is increasing. Because of this, the Biden Administration has made it easier for smaller cities and counties to apply for funding under the $1 trillion infrastructure bill passed last fall to speed up productivity.
The White House has already released $110 billion in infrastructure funding to date, and this is expected to boost the domestic basic materials industry. Furthermore, the Biden Administration has declared that basic materials required for all construction work must now be produced domestically. According to Market Study, the global construction industry is projected to grow at a CAGR of more than 7.4% from 2022 to 2028. This brightens the prospects of the basic materials industry.
Therefore, we think beaten-down basic materials stocks Vale S.A. (VALE), Eastman Chemical Company (EMN), CRH plc (CRH), RPM International Inc. (RPM), and James Hardie Industries plc (JHX), which possess solid fundamentals, could be solid bets now.
Vale S.A. (VALE)
Headquartered in Rio de Janeiro, Brazil, VALE and its subsidiaries produce and sell iron ore and iron ore pellets as raw materials in steelmaking in Brazil and internationally. The company operates through Ferrous Minerals and Base Metals segments.
On May 6, 2022, VALE confirmed its long-term contract with Tesla Inc. to supply Class 1 nickel in the U.S. This agreement is expected to help the company expand its footprint as a market leader in nickel production and achieve sustainability goals.
VALE’s nickel revenue increased 2.4% year-over-year to $866 million for the quarter ended March 31, 2022. Its cobalt revenue increased 68.4% year-over-year to $32 million. Also, its net revenues from coal came in at $448 million, up 387% year-over-year. The company’s total assets were $93.15 billion for the period ended March 31, 2022, compared to $86.98 billion for the period ended March 31, 2021.
VALE’s EPS is estimated to grow 51.5% per annum over the next five years. The stock has declined 8.3% over the past nine months to close yesterday’s trading session at $17.49.
VALE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
VALE has an A grade for Quality and a B for Value and Sentiment. Within the Industrial – Metals industry, it is ranked #7 out of 38 stocks. Click here to see the additional POWR Ratings for Growth, Momentum, and Stability for VALE.
Eastman Chemical Company (EMN)
EMN in Kingsport, Tenn., operates as a specialty materials company in the United States and internationally. Its segments are Additives & Functional Products; Advanced Materials; Chemical Intermediates; and Fibers.
On April 28, 2022, Mark Costa, Board Chair and CEO, said, “Going forward, we remain focused on delivering strong revenue, earnings, and cash flow for the remainder of this year and the coming years. We are also continuing to make great progress on our circular initiatives, which are expected to be a meaningful contributor to our growth.”
EMN’s sales came in at $2.71 billion for its fiscal 2022 first quarter, up 12.7% year-over-year. Its chemical intermediates sales were $799 million, up 32.1% year-over-year. Furthermore, its net cash provided by financing activities were $129 million compared to a $137 million loss in the year-ago period.
Analysts expect EMN’s revenue to be $2.76 billion for the quarter ended June 30, 2022, representing a 14.8% year-over-year rise. The company’s EPS is expected to increase 10.4% to $9.77 in 2022. The stock has declined 13.3% in price over the past three months to close yesterday’s session at $104.73.
EMN’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Ratings system.
CRH plc (CRH)
Headquartered in Dublin, Ireland, CRH, and its subsidiaries manufacture and distribute building materials. It operates in three segments: Americas Materials; Europe Materials; and Building Products.
On March 3, 2022, Albert Manifold, CEO, said, “Despite an inflationary input cost environment, we expanded our margins and delivered good growth in profits, returns and cash generation. This further underpins our strong and flexible balance sheet, providing us with significant opportunities for future growth and value creation.”
For the year ended Dec. 31, 2021, CRH’s revenue came in at $30.98 billion, up 12.3% year-over-year. Its group profit was$2.62 billion, up 125% year-over-year, while its EPS was 326 cents, up 129.9% year-over-year.
CRH’s revenue is expected to come in at $31.94 billion for its fiscal period ending Dec. 31, 2022, representing a 3.4% year-over-year rise. Over the past three months, the stock has declined 11.3% in price to close yesterday’s trading session at $40.74.
It is no surprise that CRH has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Value, Stability, and Sentiment.
RPM International Inc. (RPM)
RPM manufactures, markets, and sells specialty chemicals for the industrial, specialty, and consumer markets. The Medina, Ohio, company and its subsidiaries are world leaders in specialty coatings, sealants, building materials, and related services.
On April 6, 2022, Frank C. Sullivan, RPM’s Chairman and CEO, said, “We have been fast to respond to supply chain challenges by quickly scaling up in-house resin production at the manufacturing plant we acquired in Texas last September. In addition, because of our on-going investments in the fastest-growing areas of our business, our high-performance building construction and coatings systems have achieved accelerated growth.”
RPM’s net sales increased 13% year-over-year to $1.43 billion for its third quarter, ended Feb. 28, 2022. Its gross profit was $498.59 million, up 5.6% year-over-year. In addition, its total current assets came in at $2.81 billion for the period ended Feb.28, 2022, compared to $2.45 billion for the period ended Feb. 28, 2021.
For its fiscal 2022, analysts expect RPM’s revenue to be $6.72 billion, representing a 10% year-over-year rise. In addition, the company’s EPS is expected to increase 25% to $1.35 for the quarter ended Aug. 31, 2022. The stock has declined 14.2% year-to-date to close yesterday’s trading session at $86.70.
RPM has an overall B rating, which equates to a Buy in our POWR Ratings system. It has a B grade for Growth and Stability. Click here to see RPM’s rating for Value, Momentum, Sentiment, and Quality. RPM is ranked #39 of 91 stocks in the Chemicals industry.
James Hardie Industries plc (JHX)
Based in Dublin, Ireland, JHX and its subsidiaries manufacture and sell fiber cement, fiber gypsum, and cement-bonded building products for interior and exterior building construction applications in the U.S., Australia, Europe, New Zealand, the Philippines, and Canada. Its three segments are North America Fiber Cement; Asia Pacific Fiber Cement; and Europe Building Products.
On May 17, 2022, JHX’s CEO Harold Wiens said, “The global team’s success in delivering high value products, is the result of enabling our customers to make more money by selling more James Hardie products and marketing directly to the homeowners to create demand of our high value products through our customers.”
JHX’s net sales increased 24.3% year-over-year to $3.61 billion for the year ended March 31, 2022. Its net income came in at $459.10 million, up 74.7% year-over-year, while its EPS came in at $1.03, up 74.6% year-over-year.
JHX’s revenue is expected to increase 16.3% year-over-year to $4.20 billion for the fiscal period ending March 31, 2023. JHX’s EPS is expected to grow 15% per annum for the next five years. Over the past three months, the stock has declined 22.8% in price to close yesterday’s session at $25.25.
JHX has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Quality and a B grade for Growth and Stability. JHX is ranked #7 of 48 stocks in the Industrial – Building Materials industry. Click here to see the additional POWR Ratings for JHX (Value, Momentum, and Sentiment).
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VALE shares were trading at $17.58 per share on Thursday morning, up $0.09 (+0.51%). Year-to-date, VALE has gained 30.15%, versus a -14.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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