The rising cost of some crucial raw materials used in battery production due to a shortage in mining capacity could be a challenge for both electric vehicle (EV) makers and materials companies. However, both industries’ efforts to collaborate and open extraction areas for essential battery metals are culminating in a more optimistic outlook for EV manufacturing. Also, plans to build battery cell plants near raw material extraction sites should help mitigate the scarcity of raw materials.
Moreover, EVs are expected to repeat their positive sales trends in 2022. Also, the EV industry is projected to dominate the automotive industry over the next couple of decades, with increasing support from governments and strong consumer demand.
Therefore, we think the shares of EV materials suppliers BHP Group (BHP), Rio Tinto Group (RIO), and Anglo American plc (NGLOY) should benefit.
BHP Group (BHP)
Headquartered in Melbourne, Australia, BHP is a global resource company that operates through Petroleum; Copper; Iron Ore; and Coal segments. The company focuses on producing copper for renewable energy, nickel for EVs, potash for sustainable farming, and other resources. Also, BHP provides towing, freight, marketing and trading, marketing support, finance, administrative, and other services.
This month, BHP ordered four battery-electric locomotives and plans to conduct trials at its Western Australia Iron Ore rail network. The four locomotives are a part of the company's ongoing efforts to reduce its operational carbon emissions. The company believes this is a new and innovative solution to shape its business for a cleaner future.
BHP's revenue came in at $56.92 billion for the year ended June 30, 2021. The company's profit from operations amounted to $25.52 billion, and its financial income came in at $67 million during the period.
BHP has gained 17.5% in price over the past month and 17.9% over the past three months.
BHP's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has a B grade for Growth, Stability, and Quality. We have also graded BHP for Momentum, Value, and Sentiment. Click here to access all of BHP's ratings. BHP is ranked #5 of 35 stocks in the Industrial - Metals industry.
Rio Tinto Group (RIO)
Headquartered in London, RIO explores, mines, and processes mineral resources worldwide. Iron Ore; Aluminum; Copper and Diamonds; Energy and Minerals are the company’s segments. RIO also owns open pit and underground mines, mills, refineries, smelters, power stations, and research and service facilities.
This month, as part of the company's strategy to reduce its carbon emissions by 50% by 2030, RIO purchased four battery-electric trains in the Pilbara region of Western Australia. The company purchased four 7MWh FLX drive battery-electric locomotives from Wabtec Corporation. RIO believes that its partnership with Wabtec is an investment in innovation and an acknowledgement of its need to increase the pace of its decarbonization efforts.
During the six months ended June 30, 2021, RIO's operating profit increased 198.1% year-over-year to $17.44 billion. The company's income came in at $42 million. Its EPS grew 271.4% from its year-ago value to $756.1c ($7.56).
RIO shares have soared 20% in price over the past month and 9.9% over the past three months.
RIO's POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has a B grade for Quality, Value, and Stability.
In addition to the POWR Rating grades I've just highlighted, one can see RIO's ratings for Growth, Sentiment, and Momentum here. The stock is ranked #6 in the Industrial - Metals industry.
Anglo American plc (NGLOY)
Headquartered in London, NGLOY is a global mining company. De Beers; Platinum Group Metals; Copper; Iron Ore; Nickel and Manganese; Crop Nutrients; Corporate and others are the company’s segments. Also, NGLOY explores for rough and polished diamonds, metallurgical and thermal coal, polyhalite, as well as alloys.
NGLOY's revenue increased 113.8% year-over-year to $21.78 billion for the six months ended June 30, 2021. Its underlying EBITDA grew 262.4% from its year-ago value to $12.14 billion. The company's operating profit rose 522.5% from the prior-year quarter to $10.99 billion. And its EPS increased 986.8% year-over-year to $4.13.
NGLOY has surged 25% in price over the past month and 36.1% over the past year.
It is no surprise that NGLOY has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Value and a B grade for Growth and Sentiment.
Click here to see the additional POWR Ratings for NGLOY (Stability, Quality, and Momentum). NGLOY is ranked #2 in the Industrial - Metals industry.
BHP shares were trading at $68.96 per share on Thursday morning, up $0.48 (+0.70%). Year-to-date, BHP has gained 14.27%, versus a -3.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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