Several steel companies are attractive at the moment with their stocks largely outperforming the broader market over the last few years.
Notably, many basic materials sector stocks including these top-rated steel producers may be able to offer defensive protection to investors’ portfolios if inflation reaccelerates.
Commercial Metals CMC
One company that took advantage of rising inflation rendering higher steel prices over the last few years is Commercial Metals. Shares of CMC are up a modest +8% in 2023 but have now climbed +75% over the last two years to largely outperform the S&P 500’s -1% and the Nasdaq’s -7%.
Furthermore, Commercial Metals’ annual earnings remain well above historic levels even with a dip naturally expected after a record year that saw EPS at $8.19 in 2022. The recent expansion is very impressive for a steel and metals producer who has been in business for over a hundred years.
Fiscal 2023 earnings are now expected at $7.56 per share which would still represent 263% growth over the last five years with 2019 pre-pandemic EPS at $2.08 a share. Earnings are expected to remain well above pre-pandemic levels next year as well with FY24 EPS projected at $6.60 per share.
Most convincing is that Commercial Metals stock trades at 7.8X forward earnings which is roughly on par with the Zacks Steel-Producers industry average and a steep discount to the S&P 500’s 20.8X.
In addition to CMC shares trading at an attractive forward earnings multiple, FY24 EPS estimates have soared 14% over the last 30 days. This largely attributes to Commercial Metals stock sporting a Zacks Rank #1 (Strong Buy) and an overall “A” VGM Style Scores grade for the combination of Value, Growth, and Momentum.
L.B. Foster FSTR
Sporting a Zacks Rank #2 (Buy) L.B. Foster’s stock is starting to stand out as the company’s growth and post-pandemic recovery gains steam.
L.B. Foster has a niche in the steel industry as a provider of rail and trackwork, piling, highway products, and tubular products. Total sales are forecasted to jump 9% in FY23 and rise another 6% in FY24 to $577.21 million.
Annual earnings are projected to climb from an adjusted loss of -$4.25 a share last year to $0.53 per share in FY23. Even better, FY24 earnings are expected to skyrocket another 117% at $1.15 a share.
More importantly, FY24 earnings estimates are up 9% over the last 60 days as L.B. Foster’s bottom line edges closer to pre-pandemic levels and 2019 EPS of $1.62 a share. Plus, L.B. Foster’s stock has soared +88% YTD and is now up +20% over the last two years to outpace the broader indexes.
POSCO PKX
Among foreign steel producers, Korea-based Posco Holdings is intriguing as a manufacturer of hot and cold rolled steel products, heavy plate, and other steel products for the construction and shipbuilding industries.
At the moment Posco’s stock lands a Zacks Rank #2 (Buy) as the trend of rising earnings estimate revisions is very compelling. Over the last two months, FY23 and FY24 earnings estimates have soared 13% and 18% respectively. Posco’s annual earnings are now expected to dip -3% this year but rebound and climb 44% in FY24 at $12.66 per share.
This is a strong indication that Posco’s stellar stock performance could continue with shares of PKX soaring +108% in 2023. Furthermore, Posco’s stock is now up +56% over the last two years.
Bottom Line
It’s hard to overlook the stellar performances of these steel producer’s stocks over the last few years. With inflationary pressures still a concern to the broader global economy, Commercial Metals, L.B. Foster, and Posco stock remain attractive as they have the ability to benefit from higher steel prices.
POSCO (PKX): Free Stock Analysis Report
Commercial Metals Company (CMC): Free Stock Analysis Report
L.B. Foster Company (FSTR): Free Stock Analysis Report
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