As major economies worldwide reopen, the demand for metals such as steel, iron ore and copper has also been growing thanks to reviving industrial, construction, and other activities that require metals as raw materials. Investors’ increasing interest in the metal space is evident in Invesco DB Base Metals Fund’s (DBB) 20.3% returns year-to-date compared to SPDR S&P 500 Trust ETF’s (SPY) 13.7% gains.
With rising demand for metals amid continuing supply issues, metals’ prices are expected to continue rising in the near term. In fact, the price surge for steel is expected to continue into next year, according to UBS Group AG (UBS). Consequently, metals companies are well positioned to benefit.
So, we think it would be wise to invest in metal stocks Southern Copper Corporation (SCCO), Sandvik AB (SDVKY), and Usinas Siderúrgicas de Minas Gerais S.A. (USNZY). They have recently been upgraded to ‘Strong Buy’ in our proprietary POWR Ratings system.
Southern Copper Corporation (SCCO)
SCCO is an integrated copper producer engaged in the mining, exploration, smelting and refining of copper and other minerals in Peru, Mexico, Argentina, Ecuador, and Chile. Its segments include Peruvian operations, Mexican open-pit operations, and its Mexican underground mining operations segment identified as its IMMSA unit.
The company’s net sales increased 47.3% year-over-year to $2.53 billion for the first quarter ended March 31, 2021. Its net income for the quarter came in at $763.80 million, up 255.6% from the prior-year quarter. SCCO’s EPS came in at $0.99, which represents a 253.6% increase year-over-year.
Analysts expect SCCO’s EPS and revenue to increase 202.9% and 89.3%, respectively, year-over-year to $1.03 and $2.67 billion for the current quarter ending June 30, 2021. It surpassed consensus EPS estimates in each of the trailing four quarters.
German Larrea, Chairman of the Board, commented on SCCO’s progress, noting that, “Once again our quarterly results reflect the timely roll-out of our expansion programs and cost control improvements, which allow us to produce copper at a very competitive cash cost of $0.74 per pound of copper.” The stock has gained 77.4% over the past year to close yesterday’s trading session at $65.80.
It’s no surprise that SCCO has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock was upgraded from ‘Buy’ to ‘Strong Buy’ on June 11, 2021. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SCCO has a B grade for Stability, Momentum and Quality. Click here to see SCCO’s ratings for Growth, Value and Sentiment as well.
SCCO is ranked #4 of 42 stocks in the Industrial-Metals industry.
Sandvik AB (SDVKY)
Headquartered in Stockholm, Sweden, SDVKY is an engineering company that operates in the mining and rock excavation, metal-cutting, and materials technology space. The company’s offerings include metal-cutting tools and tooling systems, such as drilling, milling, and turning tools. It serves several industries, including automotive, construction, and renewable energy.
For the first quarter, ended March 31, 2021, SDVKY’s operating profit came in at SEK 4.26 billion ($511.60 million), which represents a 54.1% year-over-year rise. The company’s profit for the period was SEK3.19 billion ($383.10 million), up 73.6% year-over year. Its adjusted EPS increased 15.5% year-over-year to SEK 2.46.
In its fiscal year 2021, analysts expect SDVKY’s EPS and revenue to increase 37.8% and 20.8%, respectively, year-over-year to $1.35 and $11.35 billion. It surpassed consensus EPS estimates in each of the trailing four quarters.
On May 7, 2021, SDVKY agreed to acquire South African based Kwatani, a leading supplier of screens and feeders for the mining industry. The acquisition is expected to expand SDVKY’s equipment range and complement its existing aftermarket product and services portfolio. The stock has rallied 59.3% over the past year to close yesterday’s trading session at $26.69.
SDVKY’s POWR Ratings reflects this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. It was upgraded from ‘Buy’ to ‘Strong Buy’ on June 11, 2021.
The stock has an A grade for Quality, and a B grade for Growth and Stability. Apart from these, one can see SDVKY’s ratings for Sentiment, Value and Momentum here.
SDVKY is ranked #6 of 84 stocks in the A-rated Industrial-Machinery industry.
Click here to check out our Industrial Sector Report for 2021
Usinas Siderúrgicas de Minas Gerais S.A. (USNZY)
Based in Brazil, USNZY manufactures and markets flat steel products in Brazil and internationally. The company manufactures and sells various products and raw materials, including flat steel, iron ore, and stamped steel parts used in the automotive industry. It operates through four segments: steelworks, mining and logistics, steel transformation and capital goods.
The company’s net revenues came in at R$7.07 billion ($1.39 billion) for the first quarter, ended March 31, 2021, which represents an 85.6% year-over-year rise. USNZY’s adjusted EBITDA for the quarter was R$2.42 billion ($474.95 million), up 325.3% from the same period last year. Its working capital was R$4.90 billion ($961.68 million), up 12.1% year-over-year.
Analysts expect SCCO’s EPS and revenue to increase 1,450% and 68.6%, respectively, year-over-year to $0.54 and $4.83 in its fiscal year 2021. The stock has gained 187.4% over the past year to close yesterday’s trading session at $3.65.
USNZY’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to Strong Buy in our POWR Ratings system. USNZY was upgraded from ‘Buy’ to ‘Strong Buy’ on June 14, 2021.
The stock has an A grade for Growth, and a B grade for Momentum and Quality. Click here to see the additional POWR Ratings for USNZY (Stability, Sentiment and Value).
USNZY is ranked #9 of 34 stocks in the A-rated Steel industry.
SCCO shares were trading at $63.09 per share on Tuesday morning, down $2.71 (-4.12%). Year-to-date, SCCO has declined -1.40%, versus a 13.90% rise in the benchmark S&P 500 index during the same period.
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand.