Over the past year, the steel industry has faced several economic and geopolitical difficulties. However, the steel market is expected to continue to grow, driven by increasing demand from developing countries, infrastructure investment, and technological advancements.
In light of this, we think it could be wise to capitalize on the industry’s tailwinds by investing in fundamentally strong steel stocks Nippon Steel Corporation (NPSCY), Voestalpine AG (VLPNY) and Acerinox, S.A. (ANIOY), which exhibit strong momentum.
The steel industry is an essential component of the global economy, as steel is used in various applications, including construction, transportation, energy, and packaging. The global steel market is expected to grow at 5.4% CAGR until 2029. In recent years, the steel market has seen a steady growth in demand due to increasing industrialization and urbanization.
Furthermore, expanding automobile industry and increase in demand for carbon steel in the automobile industry is expected to drive the growth of the market. The automobile sector uses carbon steel that has a high percentage of carbon and is quenched after heat treatment to achieve enhanced durability.
According to a report by Allied Market Research, the global carbon steel market is projected to grow at a CAGR of 3.6%, reaching $1.30 trillion by 2032.
Let’s discuss the stocks mentioned above in detail:
Nippon Steel Corporation (NPSCY)
Headquartered in Tokyo, Japan, NPSCY engages in steelmaking, fabrication, engineering, construction, and materials businesses. It supplies steel products, such as plates, sheets, and rods, alongside titanium and stainless materials for the automotive, energy, infrastructure, and electronics sectors.
On June 16, NPSCY unveiled the addition of ZEXEED Checkered Sheet to its range of highly corrosion-resistant coated steel sheets. By harnessing the exceptional corrosion resistance of ZEXEED and the new product, NPSCY can fulfill customer requirements, minimize life cycle costs by extending equipment lifespan, tackle aging infrastructure, and optimize processes amidst a declining workforce.
NPSCY’s trailing-12-month asset turnover ratio of 0.87x is 16.9% higher than the 0.74x industry average. Its trailing-12-month net income margin of 17.79% is 323.6% higher than the 4.20% industry average.
For the year ended March 31, 2023, NPSCY’s revenue increased 17.1% year-over-year to ¥7.98 trillion ($56.73 billion). Its gross profit grew 5.9% from the prior year to ¥1.29 trillion ($9.20 billion). Also, the company’s profit for the year and EPS rose 10.7% and 2.2% year-over-year to ¥738.73 billion ($5.25 billion) and ¥671.89, respectively.
The consensus revenue estimate of $15.60 billion for the first quarter ended June 2023 reflects an 8% year-over-year improvement. Moreover, the company surpassed the consensus revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 12.8% over the past six months and 46.3% over the past year to close the last trading session at $6.96. NPSCY is currently trading above its 50-day and 200-day moving averages of $6.94 and $6.43, indicating an uptrend.
NPSCY’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
NPSCY has a B grade for Value, Stability, and Momentum. It has ranked #3 in the A-rated 34-stock Steel industry.
In addition to the POWR Ratings I’ve just highlighted, you can see NPSCY’s ratings for Growth, Quality, and Sentiment here.
Voestalpine AG (VLPNY)
Based in Linz, Austria, VLPNY processes, develops, manufactures, and sells steel products. Its segments include Steel; High-Performance Metals; Metal Engineering; Metal Forming; and Other. The company’s offerings comprise steel strips, heavy plates, and turbine casings for various industries such as automotive, construction, and energy.
On March 9, VLPNY revealed its largest-ever order valued at around €237 million ($258.25 million) for turnouts, drives, and rail technology, including diagnostic systems for the High Speed 2 rail network in Great Britain. Such major projects are expected to enhance the company’s growth prospects.
VLPNY’s trailing-12-month asset turnover ratio of 1.07x is 43.4% higher than the 0.74x industry average. Its trailing-12-month levered FCF margin of 5.94% is 67.4% higher than the 3.55% industry average.
For the fiscal year ended March 31, 2023, VLPNY’s revenues increased 22.1% year-over-year to €18.23 billion ($20.06 billion). The company’s EBITDA rose 11.1% from the previous year to €2.54 billion ($2.80 billion). Furthermore, its profit after tax from continuing operations came in at €1.09 billion ($1.20 billion), a 1.2% year-over-year increase.
VLPNY’s revenue is expected to grow 1.3% year-over-year to $4.82 billion for the fiscal 2024 first quarter that ended June 30, 2023. Also, the company topped the consensus revenue estimates in all four trailing quarters, which is impressive.
Over the past nine months, the stock has gained 85.5% to close the last trading session at $6.78. VLPNY is currently trading above its 200-day moving average of $5.97, indicating an uptrend.
VLPNY’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
VLPNY has an A grade for Value and a B for Stability, Quality, and Momentum. It ranks on top in the same industry.
Click here to access additional VLPNY ratings (Growth and Sentiment).
Acerinox, S.A. (ANIOY)
ANIOY, headquartered in Madrid, Spain, manufactures, transforms, and markets stainless steel products. Its offerings include coil cold rollings, hot rolled coils, roughing materials, discs, billets, and plates. The company also provides steel wires, corrugated wires, hexagonal wire rods, bars, rebars, steel profiles, and corrugated hot rolls.
On January 26, ANIOY unveiled a $244 million investment plan for its largest stainless-steel factory, North American Stainless (NAS), in the United States. The investment aims to enhance the production of flat products, mainly focusing on higher value-added varieties such as Bright Annealing and special composition steels.
This initiative could bolster ANIOY’s presence in the United States and fortify its leadership position. Additionally, it will reaffirm the company’s unwavering commitment to NAS, one of the world’s most efficient stainless steel manufacturing facilities, responsible for approximately 50% of the nation’s stainless-steel production.
ANIOY’s trailing-12-month asset turnover ratio of 1.23x is 64.8% higher than the 0.74x industry average. Its trailing-12-month gross profit margin of 35.16% is 23.8% higher than the 28.39% industry average.
For the first quarter that ended March 31, 2023, ANIOY’s revenue increased 5% quarter-over-quarter to €1.78 billion ($1.96 billion). The company’s EBITDA rose 150% sequentially to €226 million ($248.69 million).
In addition, as of March 31, 2023, the company’s current assets stood at €4.66 billion ($5.13 billion), compared to €4.42 billion ($4.86 billion) as of December 31, 2022. Also, its total assets amounted to €6.56 billion ($7.22 billion), compared to €6.32 billion ($6.95 billion) as of December 31, 2022.
Shares of ANIOY have gained 40.5% over the past nine months to close the last trading session at $5.52. ANIOY is currently trading above its 50-day and 200-day moving averages of $5.33 and $4.98, indicating an uptrend.
ANIOY’s solid outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
ANIOY has an A grade for Value and a B for Stability, Momentum, Sentiment, and Quality. It has ranked #2 within the same industry.
For ANIOY’s Growth rating, click here.
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NPSCY shares were unchanged in premarket trading Wednesday. Year-to-date, NPSCY has gained 17.17%, versus a 17.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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