The metal industry encountered several challenges in recent years. Escalating raw material and transportation expenses hindered manufacturers’ profitability. Moreover, pandemic-induced supply chain disruptions triggered factory closures, labor shortages, and shipping delays, further impacting the industry’s growth.
Despite these headwinds, the metal sector is expected to rebound in the upcoming years, buoyed by rapid urbanization and infrastructural development worldwide. Hence, robust metal stocks BHP Group Limited (BHP), Valmont Industries, Inc. (VMI), and Ferroglobe PLC (GSM) could be ideal additions to your portfolio this month.
Before delving into the fundamentals of these stocks, let’s discuss the factors shaping the metal industry’s future.
The upcoming years are expected to witness a relentless surge in demand for metals as emerging markets propel growth. Population expansion, urbanization, and infrastructure advancements are expected to act as catalysts, fostering the need for construction materials and increasing the reliance on metal resources.
In addition, as Electric Vehicles (EVs) gain momentum globally, the metal market is poised for significant growth and expansion. With EVs in their infancy, the forthcoming two to five years would witness a surge in demand, benefitting not only high-carbon steel but also copper and aluminum in diverse forms such as coil, sheet, plate, and bar.
Furthermore, the metal industry is expected to benefit from the growing adoption of new, advanced digital technologies, including automation, AI, and IoT, as they boost efficiency and productivity, cut costs, and enhance product quality. For instance, automation streamlines processes, AI analyzes data, and IoT enables real-time monitoring, preventing equipment failure.
According to a report by The Business Research Company, the global metal market is expected to grow at a CAGR of 6.6% and reach $5.46 trillion by 2027. Moreover, investors’ interest in metal stocks is evident from the iShares MSCI Global Metals & Mining Producers ETF’s (PICK) 10.5% returns over the past nine months.
Given the industry’s bright growth prospects, investors could consider buying fundamentally sound metal stocks BHP, VMI, and GSM this month for potential gains.
Let’s take a closer look at the fundamentals of these stocks.
BHP Group Limited (BHP)
Based in Melbourne, Australia, BHP operates as an international resources company. Its segments include Copper; Iron Ore; and Coal. The company mines copper, silver, zinc, molybdenum, uranium, gold, iron ore, and metallurgical and energy coal. Additionally, it is involved in nickel mining, smelting, refining, and potash development activities.
On May 30, BHP announced using AI and machine learning to enhance copper recovery at the world’s largest copper mine in partnership with Microsoft (MSFT). Implementing new digital technology at BHP’s Escondida operation in Chile is anticipated to optimize concentrator performance and improve copper recovery.
The company aims to unlock greater production and value from existing mines by combining advanced digital technology capabilities with innovative work approaches.
On April 13, BHP announced that OZ Minerals Ltd (OZL) shareholders had accepted the scheme of arrangement for BHP to acquire 100% of OZL’s shares. With the acquisition of OZL and its assets, BHP anticipates gaining further exposure to the copper, nickel, and uranium markets.
For the half-year that ended December 31, 2022, BHP’s financial income increased 744% year-over-year to $211 million. Moreover, as of December 31, 2022, the company’s non-current assets came in at $67.72 billion, compared to $66.50 billion as of June 30, 2022. Also, its cash and cash equivalents amounted to $9.61 billion as of December 21, 2022.
The consensus EPS estimate of $4.41 for the fiscal year ending June 2024 reflects a 1.6% year-over-year improvement. Over the past year, the stock has gained 10.1% to close the last trading session at $57.80.
BHP’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
BHP has an A grade for Quality and a B for Stability and Value. It has ranked #6 in the 31-stock B-rated Industrial - Metals industry.
In addition to the POWR Ratings I’ve just highlighted, you can see BHP ratings for Growth, Momentum, and Sentiment here.
Valmont Industries, Inc. (VMI)
VMI is an international producer and seller of metal products. Its segments include Infrastructure and Agriculture. The company manufactures and distributes steel, concrete, and hybrid structures for various equipment. It also provides coatings services to preserve metal products, ensuring their durability and longevity.
Due to robust market demand and the exceptional performance and operational progress of VMI’s global teams, the company recorded substantial growth in operating income and expanded margins across both segments during its first quarter of 2023.
Building on this strong start, the company has revised its 2023 full-year financial outlook and now anticipates its adjusted EPS to come in between $15.45 and $16.00, above the previous guidance of $15.35-$15.90.
For the first quarter that ended April 1, 2023, VMI’s adjusted net sales increased 10.4% year-over-year to $1.06 billion. Its gross profit grew 23.8% from the year-ago value to $308.59 million. Moreover, adjusted net earnings and adjusted EPS attributable to VMI grew 17.9% and 17.6% year-over-year to $77.65 million and $3.61, respectively.
Analysts expect VMI’s revenue to grow 5.3% year-over-year to $4.58 billion for the fiscal year ending December 2023. The consensus EPS estimate for the ongoing year is expected to increase 13.7% year-over-year to $15.72. Moreover, the company topped its consensus revenue estimates in all four trailing quarters, which is impressive.
The stock has gained 27.5% over the past year to close the last trading session at $283.00.
VMI’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
VMI has an A grade for Momentum and a B for Growth and Sentiment. It has ranked #7 in the 31-stock Industrial – Metals industry.
Click here to access additional VMI ratings (Value, Stability, and Quality).
Ferroglobe PLC (GSM)
Headquartered in London, United Kingdom, GSM operates in the silicon and specialty metals sector. It supplies silicone chemicals and ferrosilicon products for steel production. The company caters to silicone chemical, aluminum, and steel manufacturers; automotive companies; photovoltaic solar cell producers; and concrete manufacturers.
In the latest quarterly release, GSM unveiled its progress in finalizing two multi-year power contracts in Spain, aiming to expand its presence in the country. Also, the company has made strategic investments in expanding its quartz mine in Spain to ensure a supplementary supply of top-notch quartz.
In addition, the company solidified its intentions by signing a letter of intent to acquire an additional quartz mine. It is also poised to initiate operations of the third furnace in Polokwane, culminating in a total plant capacity of 55,000 tons. These initiatives could fortify the GSM’s revenue growth and facilitate its expansion plans.
For the first quarter that ended March 31, 2023, GSM’s operating cash flow increased 104.1% year-over-year to $134.53 million. Its free cash flow grew 106.5% from the year-ago value to $117.24 million.
As of March 31, 2023, the company’s current assets stood at $1.11 billion, compared to $1.05 billion as of March 31, 2022. Also, its total assets increased 3.3% year-over-year to $1.91 billion.
Analysts expect GSM’s revenue to increase 7.6% year-over-year to $1.98 billion for the fiscal year ending December 2024. The company’s EPS for the same period is expected to grow 78% from the prior year to $1.05. Shares of GSM have gained 29% year-to-date to close the last trading session at $4.72.
GSM’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
GSM has an A grade for Quality and Sentiment and a B for Value and Momentum. It has ranked #5 out of 31 stocks within the same industry.
In addition to the POWR Ratings I’ve just highlighted, you can see GSM’s ratings for Stability and Growth here.
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BHP shares were trading at $58.29 per share on Friday afternoon, up $0.49 (+0.85%). Year-to-date, BHP has declined -3.33%, versus a 16.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
3 Metals Stocks to Buy in July StockNews.com
