Although high inflation resulting from geopolitical tensions and consequent supply chain snarls disrupted various industries, the industrial metal market is expected to recover owing to its use in producing a wide range of goods.
Amid concerns of an impending recession and current market turbulence, investors could look to add strategic and fundamentally strong industrial metal stocks BHP Group Limited (BHP), Rio Tinto Group (RIO), and Ferroglobe PLC (GSM) to their portfolios.
Industrial metals include those metals such as such as copper, steel, aluminum, lead, and zinc that constitute the basis of construction and manufacturing industries.
With copper being a key component in electric vehicles, air conditioners, and refrigerators, among other electrical appliances and electronic products, its global demand is expected to remain robust, driving the growth of the metal manufacturing market.
Moreover, the growing demand from the construction industry could offer opportunities for the sector’s growth. Following China’s pullback from its zero-Covid restrictions, the industrial metal market could witness significant growth as the country accounts for about half of the global demand.
The metal market is expected to grow to $5.46 trillion by 2027 at a CAGR of 6.6%.
Amid this backdrop, investors could consider adding the featured stocks to their portfolios. Let’s take a closer look at their fundamentals.
BHP Group Limited (BHP)
Headquartered in Melbourne, Australia, BHP operates as a resources company worldwide. The company operates through Copper; Iron Ore; and Coal segments.
BHP’s 46.09% trailing-12-month net income margin is 547.3% higher than the 7.12% industry average. Likewise, its 46.30% trailing-12-month EBIT margin is 547.3% higher than the industry average of 295%. Furthermore, the stock’s 31.78% trailing-12-month Return on Total Assets is 578.8% higher than the 4.68% industry average.
BHP’s financial income for the half-year that ended December 31, 2022, increased 744% year-over-year to $211 million. The company’s total non-current assets came in at $67.72 billion, compared to $66.50 billion as of June 30, 2022. Moreover, its total current liabilities came in at $11.89 billion, compared to $16.92 billion for the period ended June 30, 2022.
Analysts expect BHP’s EPS for fiscal 2023 to increase 4% year-over-year to $4.89. Over the past nine months, the stock has gained 20.6% to close the last trading session at $62.73.
BHP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Industrial - Metals industry, it is ranked #6 out of 33 stocks. The stock has an A grade for Quality and a B for Value and Stability.
Click here to see the additional ratings of BHP for Growth, Momentum, and Sentiment.
Rio Tinto Group (RIO)
Headquartered in London, the United Kingdom, RIO engages in exploring, mining, and processing mineral resources worldwide. The company operates through Iron Ore; Aluminium; Copper; and Minerals Segments.
In terms of the trailing-12-month EBIT margin, RIO’s 32.30% is 175.6% higher than the 11.72% industry average. Its 13.24% trailing-12-month levered FCF margin is 274.6% higher than the 3.54% industry average. Likewise, its 12.84% trailing-12-month Return on Total Assets is 174.2% higher than the industry average of 4.68%.
RIO’s consolidated sales revenue for fiscal year 2022 came in at $55.55 billion. The company’s underlying EBITDA came in at $26.27 billion. Moreover, its EPS came in at 762.1c.
RIO’s EPS for fiscal 2023 is expected to increase 2.2% year-over-year to $8.38. Over the past nine months, the stock has gained 19.7% to close the last trading session at $67.26.
RIO’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #10 in the same industry. It has a B grade for Value and Quality. We have also given RIO grades for Growth, Momentum, Stability, and Sentiment. Get all RIO ratings here.
Ferroglobe PLC (GSM)
Headquartered in London, the United Kingdom, GSM operates in the silicon and specialty metals industry worldwide. It provides silicone chemicals that are used in a range of applications, silicon metal for primary and secondary aluminum producers, silicomanganese, and ferromanganese.
In terms of trailing-12-month EBIT margin, GSM’s 24.12% is 105.8% higher than the 11.72% industry average. Its 16.26% trailing-12-month Return on Total Assets is 247.4% higher than the 4.68% industry average. Furthermore, the stock’s 19.34% trailing-12-month levered FCF margin is 447.2% higher than the 3.54% industry average.
GSM’s total assets for the first quarter that ended March 31, 2023, increased 3.3% year-year-over-year to $1.91 billion. Its adjusted EBITDA came in at $44.77 million, while its adjusted EPS came in at $0.05.
GSM’s revenue for the quarter ending December 31, 2023, is expected to increase 8.9% year-over-year to $488.40 million. The stock has gained 38.7% year-to-date to close the last trading session at $5.34.
GSM’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. It is ranked #8 in the Industrial - Metals industry. It has an A grade for Sentiment and Quality and a B for Value.
In total, we rate GSM on eight different levels. Beyond what we stated above, we have also given GSM grades for Growth, Momentum, and Stability. Click here to access all the ratings.
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BHP shares were trading at $63.72 per share on Thursday morning, up $0.99 (+1.58%). Year-to-date, BHP has gained 5.67%, versus a 15.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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