Several steel companies are currently attractive, with their stocks consistently outperforming the broader market in recent years. These top-rated steel producers, along with other basic materials sector stocks, have the potential to offer defensive protection to investors’ portfolios if inflation reaccelerates.
Commercial Metals (CMC)
One company that has taken advantage of rising inflation and higher steel prices is Commercial Metals. The stock has performed well, with a modest 8% increase in 2023 and a significant 75% climb over the past two years, outperforming both the S&P 500 and the Nasdaq. Commercial Metals’ annual earnings remain strong, even with a dip expected after a record year in 2022. Fiscal 2023 earnings are projected to be $7.56 per share, representing 263% growth over the past five years.
Commercial Metals stock trades at a forward earnings multiple of 7.8X, which is comparable to the Zacks Steel-Producers industry average and significantly lower than the S&P 500.
L.B. Foster (FSTR)
L.B. Foster is a niche player in the steel industry, focusing on rail and trackwork, piling, highway products, and tubular products. The company’s stock is starting to stand out as its growth and post-pandemic recovery gain momentum. Total sales are forecasted to increase by 9% in FY23 and another 6% in FY24.
L.B. Foster’s annual earnings are projected to climb from an adjusted loss of -$4.25 per share last year to $0.53 per share in FY23. FY24 earnings are expected to soar 117% to $1.15 per share. The stock has performed well, with an 88% YTD increase and a 20% increase over the past two years.
POSCO (PKX)
Among foreign steel producers, Korea-based Posco Holdings is an intriguing option. The company manufactures hot and cold rolled steel products, heavy plate, and other steel products for the construction and shipbuilding industries. Posco’s stock has a Zacks Rank #2 (Buy), and earnings estimate revisions have been consistently rising. FY23 and FY24 earnings estimates have increased by 13% and 18% respectively. Posco’s annual earnings are expected to dip slightly in the current year but rebound strongly in FY24 with a 44% increase.
Posco’s stock has seen significant growth, with a 108% increase in 2023 and a 56% increase over the past two years.
Bottom Line
These steel producer’s stocks have shown stellar performances in recent years. With concerns about inflationary pressures in the global economy, Commercial Metals, L.B. Foster, and Posco stock remain attractive, as they have the potential to benefit from higher steel prices.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
