The metals industry is in flux, with high demand from industrial companies. Integration of advanced technologies is playing a pivotal role in enhancing exploration and extraction processes. Given this backdrop, it could be wise to consider fundamentally strong metal stocks, Southern Copper Corporation (SCCO), Freeport-McMoRan Inc. (FCX), and ESAB Corporation (ESAB) with high potential.
Metals are fundamental to various industries, including construction, manufacturing, and technology. Growing industrialization and infrastructure development contribute to sustained demand for metals. The global metal market is anticipated to reach $5.27 trillion by 2028, growing at a CAGR of 4.7%.
Moreover, despite some weakness in the Chinese real-estate sector, base metal prices are expected to stay stable this year and rise in 2025 due to the stimulus measures adopted in China and supply disruptions mainly due to the ban on Russian-origin metals.
Given these favorable industry trends, let’s look at the fundamentals of the top Industrial - Metals stocks, beginning with the third choice.
Stock #3: Southern Copper Corporation (SCCO)
SCCO engages in mining, exploring, smelting, and refining copper and other minerals in Peru, Mexico, Argentina, Ecuador, and Chile.
SCCO’s trailing-12-month gross profit margin of 53.24% is 89.3% higher than the industry average of 28.13%. Further, the stock’s trailing-12-month EBIT margin of 41.52% is 296.1% higher than the industry average of 10.48%. Also, SCCO’s trailing-12-month EBITDA margin of 50.17% is 206.3% higher than the industry average of 16.38%.
For the first quarter that ended March 31, 2024, SCCO’s net sales were reported at $2.60 billion. Its operating income stood at $1.19 billion. Also, the company’s net income and net earnings per common share were $738.80 million and $0.95, respectively.
In addition, as of March 31, 2024, the company’s total assets stood at $16.79 billion, compared to $16.73 billion as of December 31, 2023.
Street expects SCCO’s revenue for the second quarter (ending June 2024) to increase 14.4% year-over-year to $2.63 billion. Its EPS for the current quarter is expected to grow 27.7% year-over-year to $0.90.
SCCO’s stock has gained 52.7% over the past year and 26.5% year-to-date to close the last trading session at $107.72.
SCCO’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Quality and a B for Sentiment. SCCO is ranked #8 among 29 stocks in the Industrial - Metals industry.
Click here to access additional SCCO ratings (Momentum, Value, Growth, and Stability).
Stock #2: Freeport-McMoRan Inc. (FCX)
FCX engages in the mining of mineral properties in North America, South America, and Indonesia. It primarily explores for copper, gold, molybdenum, silver, and other metals.
FCX’s trailing-12-month EBIT margin of 26.14% is 149.4% higher than the industry average of 10.48%. Likewise, the stock’s trailing-12-month EBITDA and net income margins of 36.52% and 6.97% are 122.9% and 46.5% higher than the industry averages of 16.38% and 4.76%, respectively.
For the fiscal first quarter, which ended on March 31, 2024, FCX’s revenues increased 17.3% year-over-year to $6.32 billion, and its operating income grew 5.8% year-over-year to $1.63 billion. Net income increased 10.5% from the prior year’s quarter to $1.16 million. Furthermore, its net income per share was reported at $0.32.
Analysts predict FCX’s revenue for the second quarter (ending June 2024) to increase 5.9% year-over-year to $6.07 billion, and its EPS for the same quarter is projected to grow 11.5% year-over-year to $0.39. Moreover, the company has an excellent earnings surprise history, surpassing consensus revenue estimates in each of the trailing four quarters.
Shares of FCX have surged 23.7% over the past nine months to close the last trading session at $49.34.
FCX’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
FCX has a B grade for Growth and Quality. It is ranked #7 in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have FCX ratings for Momentum, Stability, Sentiment, and Value. Get all FCX ratings here.
Stock #1: ESAB Corporation (ESAB)
ESAB formulates, develops, manufactures, and supplies consumable products and equipment for use in cutting, joining, automated welding, and gas control equipment.
On June 4, 2024, ESAB announced that it had entered into a distribution agreement with INFRA Group to expand the availability of ESAB’s differentiated solutions by offering its welding and gas control equipment to customers in Mexico. The company expects this agreement to further accelerate its business growth.
On May 30, ESAB entered into an agreement to acquire Linde Industries Private Limited (LIPL). LIPL is a market leader in welding consumables and equipment in Bangladesh. Bangladesh is a fast-growing and attractive market, and this acquisition is expected to strengthen the company’s ability to serve its end markets and customers in the region.
ESAB’s trailing-12-month gross profit margin of 36.81% is 19.1% higher than the 30.91% industry average. Its 18.57% trailing-12-month EBITDA margin is 34.2% higher than the 13.83% industry average. Likewise, the stock’s 10.11% trailing-12-month levered FCF margin is 59.4% higher than the 6.34% industry average.
For the first quarter that ended March 29, 2024, ESAB’s net sales increased marginally year-over-year to $689.74 million. Gross profit increased 3.1% year-over-year to $255.03 million, and operating income rose 22% from the prior year’s quarter to $110.65 million. Also, the company’s net income grew 85.4% and 9% year-over-year to $61.59 million and $0.99 per share, respectively.
Street expects ESAB’s revenue for the second quarter ending June 2024 to increase 1.2% year-over-year to $687.94 million. Its EPS is expected to increase 5.1% year-over-year to $1.27 for the same year. In addition, the company surpassed consensus revenue and EPS estimates in each of the trailing four quarters.
ESAB’s stock has gained 15.8% over the past six months to close the last trading session at $95.53.
ESAB’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has a B grade for Stability and Sentiment. Within the same industry, ESAB is ranked #2.
Click here to access additional ratings of ESAB for Growth, Value, Momentum, and Quality.
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SCCO shares were trading at $108.61 per share on Wednesday afternoon, up $0.89 (+0.83%). Year-to-date, SCCO has gained 27.47%, versus a 14.41% 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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