The long-term prospects for the metal industry appear promising, bolstered by robust metal demand and metal-made products. The expected surge in infrastructural and construction projects will likely fuel demand for industrial metals.
To that end, fundamentally strong metal stocks Norsk Hydro ASA (NHYDY), Atkore Inc. (ATKR), and Ryerson Holding Corporation (RYI) could be wise portfolio additions now.
The metal industry stands as a fundamental pillar in a nation’s development, supplying indispensable raw materials and critical components to various sectors, including manufacturing, construction, automotive, aerospace, and infrastructure. The use of metal components is vital in their production processes.
An exponential surge in the global populace, increased urbanization, and expansive infrastructure innovations in burgeoning economies, notably China, India, and Brazil, are projected to reinforce the demand for metals and steel. Consequently, this could fortify the longevity of the metal industry in the upcoming years.
Additionally, the seamless assimilation of advanced technologies such as automation and collaborative robotics, Artificial Intelligence (AI), and the Internet of Things (IoT) has the potential to strengthen productivity and operational efficiency. This could also amplify output levels and curtail expenditure, thereby providing a significant boost to the metal industry.
The global metal market is anticipated to reach $5.27 trillion by 2028, growing at a CAGR of 4.7%. Furthermore, the SPDR S&P Metals and Mining ETF (XME) has returned 10.7% over the past six months, substantiating investors’ interest in metal stocks.
Considering these conducive trends, let's take a look at the fundamentals of the three Industrial – Metals stocks, starting with number 3.
Stock #3: Norsk Hydro ASA (NHYDY)
Headquartered in Oslo, Norway, NHYDY engages in power production, bauxite extraction, alumina refining, aluminum smelting, and recycling activities, and the provision of extruded solutions worldwide. It operates through Hydro Bauxite & Alumina; Hydro Aluminium Metal; Hydro Metal Markets; Hydro Extrusions; and Hydro Energy segments.
NHYDY’s Board of Directors proposed to distribute NOK 7 billion ($665.83 million) in shareholder distribution, which represents approximately 81.5% of the 2023 adjusted net income, as a combination of NOK 2.5 per share of cash dividends, 59% of adjusted net income, and NOK 2 billion ($190.24 million) of share buybacks.
It pays an annual dividend of $0.51 per share, which translates to a dividend yield of 9.16% on the current share price. Its four-year average yield is 5.67%. NHYDY’s dividend payments have grown at a 19% CAGR over the past five years.
NHYDY’s trailing-12-month cash from operations of $2.19 billion is 387.3% higher than the industry average of $448.80 million. Its trailing-12-month EBIT and levered FCF margins of 20.04% and 10.28% are 74.7% and 115.1% higher than the industry averages of 11.47% and 4.78%, respectively.
Over the past three and five years, its EBITDA grew at CAGRs of 20.8% and 7.1%, respectively, while its levered free cash flow grew at 7.7% and 11.7% CAGRs over the same periods.
For the fiscal fourth quarter that ended December 31, 2023, NHYDY’s revenue increased 6.1% year-over-year to NOK46.75 billion ($4.45 billion), while adjusted EBIT stood at NOK1.23 billion ($117.09 million). Moreover, its adjusted EBITDA stood at NOK3.74 billion ($355.46 million).
For the same quarter, adjusted net income from continuing operations attributable to NHYDY shareholders and adjusted earnings per share from continuing operations stood at NOK1.02 billion ($96.74 million) and NOK0.50, respectively.
Street expects NHYDY’s revenue for the fiscal first quarter ending March 2024 to increase marginally year-over-year to $4.58 billion. Its EPS is expected to be $0.04 for the same quarter. The company surpassed consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 4.1% intraday to close the last trading session at $5.61.
NHYDY’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a C grade for Growth, Value, Momentum, Stability, and Quality. Within the 33-stock Industrial – Metals industry, it is ranked #11.
To see additional POWR Ratings for Sentiment for NHYDY, click here.
Stock #2: Atkore Inc. (ATKR)
ATKR manufactures and sells electrical, safety, and infrastructure products in the United States and internationally. The company's segments include electrical; and safety and infrastructure.
On January 30, ATKR’s Board of Directors declared a quarterly cash dividend of $0.32 per share of common stock, payable to stockholders on March 15. This is the first quarterly dividend to be paid by the company as part of its new dividend program, which was previously announced in November 2023.
It pays an annual dividend of $1.28 per share, which translates to a dividend yield of 0.89% on the current share price.
ATKR’s trailing-12-month cash from operations of $766.89 million is 166% higher than the industry average of $288.33 million. Its trailing-12-month EBIT and net income margins of 24.05% and 18.80% are 149.2% and 217.2% higher than the industry averages of 9.65% and 5.93%, respectively.
Over the past three and five years, its EBITDA grew at CAGRs of 35.6% and 29.6%, respectively, while its levered free cash flow grew at 19.5% and 33.4% CAGRs over the same periods.
For the fiscal first quarter that ended December 29, 2023, ATKR’s net sales and gross profit stood at $798.48 million and $290.54 million, respectively. Moreover, its adjusted EBITDA stood at $213.52 million.
For the same quarter, adjusted net income and adjusted net income per share stood at $155.51 million and $4.12, respectively. Its total current liabilities came at $505.36 million as of December 29, 2023, compared to $564.60 million as of September 30, 2023.
Street expects ATKR’s revenue for the fiscal year ending September 2024 to increase marginally year-over-year to $3.54 billion. Its EPS is expected to be $17 for the same year. The company surpassed consensus EPS estimates in each of the trailing four quarters.
The stock has gained 22.5% over the past nine months to close the last trading session at $144.58. Over the past three months, it has gained 6.9%.
ATKR’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
ATKR has a B grade for Value and Quality. It is ranked #10 within the same industry.
Click here for the additional POWR Ratings for ATKR (Growth, Momentum, Stability, and Sentiment).
Stock #1: Ryerson Holding Corporation (RYI)
RYI processes and distributes industrial metals in the U.S. and internationally. It offers a line of products in carbon steel, stainless steel, alloy steels, and aluminum, as well as nickel and red metals in various shapes and forms, including coils, sheets, rounds, hexagons, square and flat bars, plates, structural, and tubing.
On December 14, 2023, RYI paid its stockholders a quarterly cash dividend of $0.19 per share of common stock. It pays an annual dividend of $0.74 per share, which translates to a dividend yield of 2.11% on the current share price. Its four-year average yield is 0.90%.
On December 4, 2023, RYI acquired Hudson Tool Steel Corporation, a supplier of tool steels and high-speed, carbon, and alloy steels. Hudson is headquartered in Cerritos, California, with additional locations in Loves Park, Illinois and Dover, New Hampshire. Hudson's expertise, together with RYI’s existing tool steel capabilities, will enable it to serve customers better across its network.
RYI’s trailing-12-month asset turnover ratio of 2.12x is 203.3% higher than the industry average of 0.70x, while its trailing-12-month levered FCF margin of 5.21% is 9.1% higher than the industry average of 4.78%.
Over the past three and five years, its revenue grew at CAGRs of 13.9% and 5.4%, respectively, while its normalized net income grew at 98.5% and 23.6% CAGRs over the same periods.
For the fiscal third quarter that ended September 30, 2023, RYI’s net sales and gross profit stood at $1.25 billion and $249.30 million, respectively. Moreover, its adjusted EBITDA stood at $78.40 million.
For the same quarter, adjusted net income attributable to RYI and adjusted earnings per share stood at $35 million and $1, respectively.
Street expects RYI’s revenue and EPS for the fiscal year ending December 2024 to be $4.62 billion and $3.38, respectively.
The stock has gained 22.4% over the past three months to close the last trading session at $35.08. Over the past six months, it has gained 17.8%.
RYI’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
RYI has an A grade for Value and a B for Growth and Quality. Within the same industry, it is ranked #4.
Beyond what we’ve stated above, we have also rated the stock for Momentum, Stability, and Sentiment. Get all ratings of RYI here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
NHYDY shares were unchanged in premarket trading Monday. Year-to-date, NHYDY has declined -16.02%, versus a 5.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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