Metals and minerals demand is anticipated to surge significantly in the foreseeable years, thanks to increased urbanization, rising infrastructure development, and clean energy transition worldwide. Furthermore, adopting digital technologies across the value chain, from operations to procurement to sales, should boost the industrial metals sector’s prospects.
Given the industry’s tailwinds, fundamental sound industrial stocks BHP Group Limited (BHP), Southern Copper Corporation (SCCO), and Marubeni Corporation (MARUY) could be ideal additions to your portfolio for solid returns.
Demand for metals and minerals is expected to rise considerably this year and beyond, driven by sustained industrial production. Production at U.S. factories rebounded at a 1.5% annualized rate in the second quarter after dropping at a 0.2% pace in the January-March period.
Furthermore, favorable government initiatives and funding for infrastructure and transportation development projects should create numerous growth opportunities for the prominent players in the industrial metals market.
The Bipartisan Infrastructure Investment and Jobs Act, signed into law by President Joe Biden in November 2021, authorized $550 billion in new federal spending over the next five years, covering everything from bridges and roads to the country’s public transit, broadband, water, and energy systems.
Demand for industrial metals is expected to surge in the coming years as the energy transition is in full force worldwide. As per the Energy Transitions Commission (ETC), the energy transition would require the production of up to 6.5 billion tonnes of materials cumulatively between 2022 and 2050, with steel, copper, and aluminum accounting for 95%.
In addition, digital transformation is accelerating across the metals and mining sector, and companies have an unprecedented opportunity to capitalize on this momentum. By integrating emerging technologies, including cloud, AI, robotics, and big data, industry players could boost throughput, simplify operations, reduce costs, and lower supply chain complexity.
According to a report by Market Research Future, the base metals mining market is expected to grow from $109.90 billion in 2023 to $472.60 billion by 2032, exhibiting a CAGR of 20.2% during the forecast period.
Against this backdrop, it could be worth adding fundamentally sound industrial stocks BHP, SCCO, and MARUY to your investment portfolio.
Let’s delve deeper into the fundamentals of these stocks:
BHP Group Limited (BHP)
BHP, headquartered in Melbourne, Australia, operates globally through segments including Copper; Iron Ore; and Coal. It engages in mining activities for metals like copper, silver, zinc, molybdenum, uranium, gold, iron ore, and coal. It also participates in the mining and refining of nickel and potash development activities.
On May 30, it was announced that BHP, which operates Escondida, an open-cut mine located in Chile’s Atacama Desert, had entered into a collaboration with Microsoft Corporation (MSFT) to utilize AI and machine learning for increased copper production.
With this collaboration, BHP aims to optimize concentrator performance and collect real-time plant data and AI-driven insights to adjust operational variables for ore processing and grade recovery, leading to enhanced efficiency of operations and hence improving the company’s profitability.
On July 11, BHP and JX Metals Corporation signed a memorandum of understanding to pursue the development of a Green Enabling Partnership focused on reducing greenhouse gas (GHG) emissions within the copper supply chain and making the copper supply chain more sustainable.
The partnership seeks to encourage circular economy practices, share knowledge on carbon footprint reduction, and engage in research for more efficient material processing and energy-smart smelting operations. Such strategic initiatives are expected to give a competitive edge to the firm.
For the fourth quarter that ended June 30, 2023, BHP’s copper production reported a 3% year-over-over growth to 476.2 Kt. The company’s production of iron ore, metallurgical coal, and nickel came in at 257 Mt, 29 Mt, and 80 Mt, increases of 9%, 22%, and 12% year-over-year, respectively.
During the half-year that ended December 31, 2022, BHP’s financial income increased 744% year-over-year to $211 million. Also, the company’s cash and cash equivalents stood at $9.61 billion as of December 21, 2022. Its non-current assets came in at $67.72 billion, compared to $66.50 billion as of June 30, 2022.
Analysts expect BHP’s revenue for the fiscal year (ending June 2024) to come in at $52.50 billion. Likewise, the consensus EPS estimate of $4.89 for the same period indicates a 9.9% rise year-over-year. In addition, the company topped the consensus revenue estimates in all four trailing quarters.
BHP’s stock has gained 3.5% over the past month and 8.3% over the past year to close the last trading session at $59.50.
BHP’s POWR Ratings reflect this robust outlook. BHP has an overall rating of B, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BHP has a grade of A for Quality and B for Value and Stability. It is ranked #7 out of 31 stocks in the Industrial - Metals industry.
Beyond what we stated above, we also have BHP’s ratings for Sentiment, Momentum, and Growth. Get all BHP ratings here.
Southern Copper Corporation (SCCO)
SCCO engages in mining, refining, and smelting copper and various minerals across Peru, Mexico, Argentina, Ecuador, and Chile. The company operates open-pit mines such as Toquepala, Cuajone, and Buenavista, producing copper, molybdenum, silver, gold, and lead concentrates.
On July 27, SCCO announced a positive view on its sales volumes for the remainder of 2023. In the second half, given the company’s current operations plans, the Buenavista new zinc concentrator and the Pilares project, it expects to produce 481,300 tons of copper; 11,400 tons of molybdenum; 76,000 tons of zinc; and 10.9 million ounces of silver.
Therefore, an uptick in copper, zinc, and silver production during the second half of 2023 should support the company’s sales through this period.
For the second quarter of fiscal 2023, SCCO’s operating income grew 11.4% from the year-ago value to $127.90 million. The company’s adjusted EBITDA rose 9.2% year-over-year to $1.11 billion. Also, its net income came in at $900.70 million and $0.71 per share, up 26.6% and 26.7% year-over-year, respectively.
Analysts expect SCCO’s revenue and EPS for the third quarter (ending September 2023) to increase 15.4% and 24.8% year-over-year to $2.49 billion and $0.84, respectively. Moreover, the company topped its consensus EPS estimates in three of the trailing four quarters, which is impressive.
Shares of SCCO have gained 12% over the past six months and 74.4% over the past year to close the last trading session at $83.40.
SCCO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system.
SCCO has a grade A for Quality and a grade B for Stability. It is ranked #8 among 31 stocks in the Industrial - Metals industry.
Click here to see the other ratings of SCCO for Growth, Momentum, Value, and Sentiment.
Marubeni Corporation (MARUY)
Headquartered in Tokyo, Japan, MARUY is a diversified business conglomerate. It manufactures and retails apparel, home furnishings, and industrial and textile materials; develops uranium, iron ore, coal, copper mines, and related equipment and services; refines aluminum and magnesium; and refines and produces oil and gas.
On August 1, MARUY and Panasonic Holdings Corp (PCRFY) jointly established EVolity Corporation, a Tokyo-based company offering fleet management services for commercial Electric Vehicles (EVs). EVolity will assist businesses in boosting EV adoption, aiding them in identifying operational impacts and providing smart charging systems and batteries.
This strategic joint venture is expected to benefit the companies significantly, driving their growth and profitability.
On July 19, MARUY launched the Grid Optimization & Vehicle Authorization Network (GOVAN) charging management service for fleet owners of commercial EVs. GOVAN employs AC chargers and offers a comprehensive solution from initial consultation on EV charging systems adoption to day-to-day operations. This new launch should bode well for the company.
For the quarter that ended on June 30, 2023, MARUY reported revenues of ¥2.02 trillion ($14.08 billion), and its operating profit was ¥95.11 billion ($66.31 million). The company’s profit for the period and earnings per share were ¥143.69 billion ($1 billion) and ¥83.04, respectively.
In addition, as of June 30, 2023, the company’s total assets amounted to ¥8.24 trillion ($57.45 billion), compared to ¥7.95 trillion ($55.43 billion) as of March 31, 2023.
Analysts expect MARUY’s revenue for the fiscal quarter (ending December 2023) to grow 2.3% year-over-year to $13.88 billion. Likewise, the company’s revenue for the current fiscal year (ending March 2024) is expected to increase 297.8% from the previous year to $66.08 billion.
The stock has gained 18.6% over the past three months and 69.0% over the past year to close the last trading session at $170.11.
MARUY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
MARUY is ranked #9 among 31 stocks in the same industry. The stock has an A grade for Value and a B for Sentiment.
To see the other ratings of MARUY for Growth, Momentum, Stability, and Quality, click here.
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BHP shares were trading at $59.63 per share on Thursday afternoon, up $0.13 (+0.22%). Year-to-date, BHP has declined -1.11%, versus a 17.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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