Despite several macroeconomic uncertainties, the metal industry's long-term outlook remains optimistic, driven by robust demand for metal and metal-related products. In this context, investors could consider buying fundamentally strong metal companies Ferroglobe PLC (GSM), Gibraltar Industries, Inc. (ROCK), and Anglo American plc (NGLOY).
Metal market sentiments are buoyed this month on the backs of China’s stimulus measures to support its economy and ailing property sector, as well as the Fed’s pause in interest rate hikes this month.
On top of it, metals play a crucial role in the global energy transition, which is also boosting the demand for strategic minerals. Global mining investment rose to its highest level for almost a decade last year due to heightened demand for critical minerals. It is estimated that the global economy will require six times more mineral inputs in 2040 than today to reach net zero by 2050.
The Bipartisan Infrastructure Investment and Jobs Act, signed into law by President Joe Biden in November 2021, has allocated $550 billion of new federal spending over the long term, boosting the economy and sustaining metal demand.
Additionally, increased infrastructure development in the United States is set to drive metal demand further, with record government spending on infrastructure projects. Last year, the federal government spent a record $36.60 billion directly on infrastructure and transferred another $94.50 billion to states.
According to Allied Market Research, the global metal and metal-manufactured products market is projected to reach $18.50 trillion by 2030, growing at a CAGR of 5.2% on the backs of technical improvements and rising demand from the automotive sector.
Let's delve deeper into the fundamentals of these stocks from the Industrial - Metals industry, starting with the third.
Stock #3: Ferroglobe PLC (GSM)
Based in London, the United Kingdom, GSM is a silicon and specialty metals company. Its product portfolio encompasses silicone chemicals, ferrosilicon items, and silica fume, serving various industries, including silicone chemicals, aluminum, steel manufacturers, automotive companies, ductile iron foundries, and concrete producers.
On July 21, GSM announced that its subsidiary would redeem $150 million of its 9.375% senior secured notes due 2025.
Beatriz Garcia-Cos, GSM’s Chief Financial Officer, remarked, “This transaction reduces our outstanding senior secured notes balance by half to approximately $150 million, providing the company with more financial flexibility going forward while saving nearly $15 million in annual interest expense.”
GSM’s trailing-12-month levered FCF margin and ROTC of 10.95% and 17.01% are 195.8% and 204% higher than the industry averages of 3.70% and 5.60%, respectively.
For the second quarter (ended June 30), GSM’s sales came in at $456.44 million, registering an increment of 13.9% from the previous quarter. Profit attributable to the parent and Profit per ordinary share came in at $31.91 million and $0.17, up 52% and 54.5% sequentially, respectively.
Furthermore, the company's adjusted EBITDA improved by 136.1% quarter-over-quarter to $105.67 million, while operating profit witnessed a 41.4% sequential growth, reaching $62.85 million.
Analysts anticipate GSM's EPS for the upcoming fiscal year (ending December 2024) to surge by 34.4% year-over-year to $0.82. The consensus revenue estimate is $1.63 billion for the same period.
GSM's stock has gained 14.1% over the past six months and 34.3% year-to-date, closing the last trading session at $5.17.
GSM’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, translating 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.
GSM has a B grade for Value, Momentum, Sentiment, and Quality. It is ranked #8 among 30 stocks in the B-rated Industrial - Metals industry.
In addition to the aforementioned POWR Ratings, we have also given GSM ratings for Growth and Stability. Access all GSM ratings here.
Stock #2: Gibraltar Industries, Inc. (ROCK)
ROCK manufactures and distributes building products for North America and Asia’s renewable energy, residential, ag-tech, and infrastructure markets. The company operates through four segments: Renewables; Residential; Agtech; and Infrastructure.
ROCK’s trailing-12-month levered FCF margin and ROTC of 12.19% and 10.44% are 123% and 53.7% higher than the industry averages of 5.47% and 6.79%, respectively.
For the fiscal second quarter that ended June 30, ROCK’s net sales came in at $364.91 million, while its gross profit rose 7.2% year-over-year to $96.74 million. Its adjusted net income and net income per share increased 15.2% and 22.9% year-over-year to $36.30 million and $1.18, respectively.
For the six months that ended June 30, net cash provided by operating activities stood at $114.09 million, up significantly year-over-year. As of June 30, 2023, the company’s long-term debt stood at $9.79 million, compared to $88.76 million as of December 31, 2022.
The company raised its bottom line projection for the fiscal year 2023. ROCK’s adjusted EPS is expected to come in between $3.90 and $4.10, compared to $3.40 in 2022, while its consolidated net sales outlook remained unchanged between $1.36 billion and $1.41 billion, compared to $1.38 billion in 2022.
For the fiscal fourth quarter ending December 2023, ROCK’s revenue and EPS are expected to increase 8.2% and 33.3% year-over-year to $339.6 million and $0.96, respectively. It surpassed Street EPS estimates in three of the trailing four quarters.
Over the past six months, the stock has gained 42.2% to close its last trading session at $68.12. Moreover, the stock gained 65.2% over the past year.
ROCK’s POWR Ratings reflect its solid fundamentals. 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 #3. To see ROCK’s Growth, Value, and Stability ratings, click here.
Stock #1: Anglo American plc (NGLOY)
Headquartered in London, the United Kingdom, NGLOY is a global mining company that explores rough and polished diamonds, copper, platinum group metals, and metallurgical and thermal coal.
NGLOY’s trailing-12-month cash from operations of $7.30 billion is significantly higher than the industry average of $361.60 million. Likewise, its trailing-12-month gross profit and EBIT margins of 56.68% and 23.26% are 100.7% and 106% higher than the industry averages of 28.25% and 11.30%, respectively.
For the six months that ended June 30, NGLOY’s revenue stood at $15.67 billion, while its underlying EBITDA came at $5.11 billion. Profit attributable to equity shareholders of the company and underlying earnings per share stood at $1.26 billion and $1.38, respectively.
Duncan Wanblad, Chief Executive of NGLOY, stated, “Our focus on operational stability and cost control are our key margin levers and we also expect to deliver annual efficiencies of $0.5 billion from across our full range of business support activities.”
Analysts expect NGLOY’s revenue and EPS to be $32.30 billion and $1.53 for the fiscal year ending December 2023. For the fiscal year 2024, its revenue and EPS are expected to grow 4.7% and 23% year-over-year to $33.82 billion and $1.88, respectively.
The stock has gained 8.5% over the past month to close the last trading session at $13.72.
NGLOY’s positive outlook is reflected in the POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has a B grade for Value, Stability, Sentiment, and Quality. Within the same industry, it is ranked first out of 30 stocks.
In addition to the POWR Ratings highlighted above, one can see NGLOY’s Growth and Momentum grades here.
What To Do Next?
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NGLOY shares were trading at $13.81 per share on Friday afternoon, up $0.09 (+0.66%). Year-to-date, NGLOY has declined -26.45%, versus a 14.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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