Rising infrastructural and construction projects are anticipated to drive demand for industrial metals, which could fortify the metal industry in the foreseeable future and keep it well-placed to thrive. Given this backdrop, let us discuss metal stocks Anglo American plc (NGLOY), Valmont Industries, Inc. (VMI), and Gibraltar Industries, Inc. (ROCK) now.
Before delving deeper into the fundamentals of the stocks mentioned above, let us briefly discuss the metal industry.
The metal industry has witnessed a fair share of challenges in the recent past amid rising material costs, transportation costs, and the war and pandemic-induced supply chain constraints, which made it difficult for metal manufacturers to maintain profitability. However, the industry is evolving amid a resilient economy and technological integration.
To begin with, a rising demand for steel and other metals from emerging countries such as India, China, and Brazil for urbanization, and infrastructure development, could help the industry grow.
There has been an uptick in demand for base metals on the backs of the reopening of China’s economy and better-than-expected industrial growth in Europe and the United States. Coupled with the increased demand, supply bottlenecks could propel the base metal prices.
The base metal copper has recently garnered prominence and is poised to witness an upward price trajectory. Experts anticipate the extensive use of red metal in telecom, real estate, EVs, and activities associated with the energy transition, suggesting a bright future for copper over the next few decades.
In addition, supply shortages of precious metals, such as platinum, and its demand surge from the automotive industry, could push up prices. According to the World Platinum Investment Council, investment demand had a great moment in the first quarter of 2023. Net platinum ETF holdings rose by 43,000 ounces during the quarter, changing course after six quarters of outflows.
Moreover, the emergence of cutting-edge technologies and their integration into the metal industry could increase its efficiency, productivity, and output and reduce costs.
The global metal market is anticipated to reach $5.46 trillion by 2027, growing at a CAGR of 6.6% from 2022 to 2027. Furthermore, the SPDR S&P Metals and Mining ETF (XME) returned 2.4% over the past month, substantiating investors’ interest.
Given the favorable industrial tailwinds, metal stocks NGLOY, VMI, and ROCK, with strong fundamentals, could be solid buys now.
Anglo American plc (NGLOY)
Headquartered in London, the United Kingdom, NGLOY operates as a mining company worldwide and explores for rough and polished diamonds, copper, platinum group metals, and metallurgical and thermal coal.
On April 4, NGLOY signed a memorandum of understanding with H2 Green Steel, the Swedish hydrogen and steel producer, to work together on the advancement of low-carbon steelmaking processes. This should bode well for the company.
NGLOY paid a dividend of $0.74 on April 28, 2023, which translates to a 4.87% yield on the current share price. Its four-year average dividend yield is 5.97%. The company’s dividend payouts have grown at a CAGR of 22% over the past three years and 14.2% over the past five years.
NGLOY’s trailing-12-month cash from operations of $9.77 billion is significantly higher than the industry average of $359 million. Likewise, its trailing-12-month ROCE, ROTC, and ROTA of 16.36%, 14.07%, and 6.70% are 53.2%, 129.9%, and 43% higher than the industry averages of 10.68%, 6.12%, and 4.68%, respectively.
For the fiscal first quarter that ended March 31, 2023, NGLOY’s copper production increased 27.1% year-over-year to 178.10 kt, while its steelmaking coal production grew 59.1% year-over-year to 3.5 Mt.
For the fiscal year that ended December 31, 2022, NGLOY’s revenue stood at $35.12 billion. Profit attributable to equity shareholders of the company and earnings per share stood at $4.51 billion and $3.68, respectively. The company’s total current assets for the year stood at $19.94 billion compared to $18.92 billion for 2021.
Analysts expect NGLOY’s revenue to grow marginally year-over-year to $35.07 billion for the fiscal year ending December 2023. Its EPS is expected to come in at $2.13 for the same period.
Over the past month, the stock has gained 4.5% to close the last trading session at $15.20.
NGLOY’s positive outlook is reflected in the POWR Ratings. It has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B for Stability and Sentiment. Within the B-rated Industrial – Metals industry, it is ranked #5 out of 34 stocks.
In addition to the POWR Ratings highlighted above, one can see NGLOY’s ratings for Growth, Momentum, and Quality here.
Valmont Industries, Inc. (VMI)
VMI produces and sells metal products in the United States, Australia, Brazil, Denmark, and internationally. The company operates through two segments: Infrastructure and Agriculture.
In February, VMI announced a $400 million share repurchase reauthorization of its outstanding common stock from time to time, by means of open market purchases or through privately-negotiated transactions, with no expiration.
On April 24, VMI declared a quarterly dividend of $0.60 per share, payable to shareholders on July 14. It pays an annual dividend of $2.40, which translates to a 0.85% yield on the current share price.
Its four-year average dividend yield is 0.96%. The company’s dividend payouts have grown at a CAGR of 12.6% over the past three years and 8.5% over the past five years.
VMI’s trailing-12-month levered FCF margin of 7.24% is 38.9% higher than the 5.21% industry average. Likewise, its trailing-12-month ROCE, ROTC, and ROTA of 17.45%, 10.80%, and 7.30% are 26.1%, 54.9%, and 44% higher than the industry averages of 13.83%, 6.97%, and 5.07%, respectively.
For the fiscal quarter that ended April 1, 2023, VMI’s net sales came in at $1.06 billion, up 8.3% year-over-year. The company’s gross profit rose 23.8% over the prior-year quarter to $308.59 million.
Adjusted net earnings attributable to VMI increased 17.9% over the prior-year quarter to $77.65 million. Its adjusted earnings per share came in at $3.61, representing an increase of 17.6% year-over-year.
For the fiscal third quarter ending September 2023, VMI’s revenue and EPS are expected to increase 5.8% and 13.7% year-over-year to $1.16 billion and $3.97, respectively. It surpassed the consensus revenue estimates in all four trailing quarters, which is impressive.
Over the past year, the stock has gained 14% to close its last trading session at $281.29. Moreover, it gained 1.3% intraday.
VMI’s POWR Ratings reflect a promising prospect. It has an overall rating of B, which translates to Buy in our proprietary rating system.
It has an A grade for Momentum and a B for Growth and Sentiment. Within the same industry, it is ranked #3.
Click here to see VMI’s POWR Ratings for Value, Stability, and Quality.
Gibraltar Industries, Inc. (ROCK)
ROCK manufactures and distributes building products for the renewable energy, residential, ag-tech, and infrastructure markets in North America and Asia. It operates through four segments: Renewables; Residential; Agtech; and Infrastructure.
ROCK’s trailing-12-month net income margin of 6.45% is 1.6% higher than the 6.35% industry average. Likewise, its trailing-12-month EBIT margin of 10.73% is 10.7% higher than the industry average of 9.69%. Furthermore, the stock’s 7.50% trailing-12-month levered FCF margin is 44% higher than the industry average of 5.21%.
For the fiscal first quarter (ended March 31, 2023), ROCK’s net sales came in at $293.27 million. The company’s gross profit rose 18.6% over the prior-year quarter to $76.93 million.
Its adjusted net income increased 10.2% over the prior-year quarter to $21.76 million. Its adjusted net income per share came in at $0.70, representing an increase of 16.7% year-over-year.
For the quarter ending September 30, 2023, ROCK’s EPS and revenue are expected to increase 1.8% and 0.3% year-over-year to $1.14 and $392.53 million, respectively. It surpassed Street EPS estimates in three of the trailing four quarters.
Over the past year, the stock has gained 33.1% to close its last trading session at $58.98. Moreover, the stock has gained 19.3% over the past three months.
ROCK’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to Buy in our proprietary rating system.
It has an A grade for Momentum and Sentiment and a B for Quality. Within the same industry, it is ranked #2.
To see ROCK’s Growth, Value, and Stability ratings, click here.
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NGLOY shares were trading at $15.63 per share on Tuesday morning, up $0.43 (+2.83%). Year-to-date, NGLOY has declined -18.45%, versus a 14.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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