Commodity prices surged significantly amid the multi-decade high inflation. However, global recession fears have led to commodity prices falling over the past few weeks.
The U.S. Consumer Price Index (CPI) rose 8.6% year-over-year in May, registering the highest increase since 1981. To combat the skyrocketing inflation rates, the Federal Reserve hiked the benchmark federal funds rate by 75 basis points on June 15, marking the most aggressive hike since 1994. The FOMC also announced its plans to raise the benchmark rate further this month.
While commodity prices have declined over the past few weeks, many economists expect the CPI report for June to show higher inflation than May. Therefore, high prices and rising demand should benefit companies dealing with essential commodities.
The resumption of industrial and manufacturing activities and the growing demand for energy, metals, and other commodities from various industries are expected to boost prices further.
Thus, investing in fundamentally sound commodity stocks Ryerson Holding Corporation (RYI), Southern Copper Corporation (SCCO), and Cameco Corporation (CCJ) could help combat the multi-decade high inflation.
Ryerson Holding Corporation (RYI)
RYI is a value-added processor and distributor of industrial metals like carbon, stainless and alloy steels, aluminum, nickel, and red metals in various shapes and forms. Along with its subsidiaries, the company operates in the United States, Canada, Mexico, and China.
On June 1, 2022, RYI acquired Ford Tool Steels (FTS), a tool steel processor. This strategic acquisition will help RYI expand its tool steel franchise in the future.
For the first quarter ended March 31, 2022, RYI’s net sales increased 52.4% year-over-year to $1.75 billion. Its gross profit grew 107.2% from the prior-year period to $410.10 million. The company’s adjusted net income and adjusted EPS increased significantly year-over-year to $167.50 million and $4.27, respectively.
Analysts expect the company’s EPS to improve 241.1% year-over-year to $4.23 for the second quarter (ended June 2022). RYI surpassed the EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 45.5% to close the last trading session at $20.68.
RYI’s strong fundamentals are reflected in its POWR Ratings. The company has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has an A grade for Value and a B for Growth, Sentiment, and Quality. It is ranked first out of 36 stocks in the Industrial – Metals industry. Click here to see the additional ratings for RYI (Momentum and Stability).
Southern Copper Corporation (SCCO)
SCCO is an integrated producer of copper and valuable by-products and operates the mining, smelting, and refining facilities in Peru, Mexico, and Chile. It operates through Peruvian operations, Mexican open-pit copper operations, and Mexican underground mining operations segment (IMMSA).
In the first quarter ended March 31, 2022, SCCO’s net sales increased 9.1% year-over-year to $2.76 billion. Its operating income came in at $1.47 billion, representing an 8.8% year-over-year improvement.
The company’s net income increased 2.7% from the year-ago value to $784.70 million, while its adjusted EBITDA grew 8% year-over-year to $1.68 billion. Also, its income per share stood at $1.02, up 3% from the prior-year period.
Street expects its EPS estimate to increase 21.3% per annum over the next five years. SCCO has declined 15.8% over the past month to close the last trading day at $49.25.
The company has an overall rating of B, which equates to Buy in our proprietary rating system. SCCO has an A grade for Quality and a B grade for Stability. In the Industrial – Metals industry, it is ranked #13.
To see the other ratings of SCCO for Growth, Value, Momentum, and Sentiment, click here.
Cameco Corporation (CCJ)
Headquartered in Saskatoon, Canada, CCJ is an integrated uranium supplier, operating through two segments: uranium and fuel services. The company offers refining, conversion, fuel manufacturing, and nuclear fuel processing services.
On May 10, 2022, CCJ increased its ownership stake in the Cigar Lake mine by 4.52% to 54.547%. The company, along with Orano Canada Inc., closed the acquisition of Idemitsu Canada Resources Ltd.’s 7.88% participating interest in the Cigar Lake Joint Venture on May 19, 2022.
CCJ’s revenues increased 37% year-over-year to C$398.04 million ($306.35 million) in the fiscal first quarter ended March 31, 2022. The company’s net earnings increased 913.3% year-over-year to C$40.28 million ($31 million), while its EPS came in at C$0.10, representing an increase of 900% year-over-year.
For the quarter ending December 31, 2022, CCJ’s EPS is expected to increase 128.7% year-over-year to $0.11. Its revenue for the quarter ended June 30, 2022, is expected to increase 33.3% year-over-year to $381.94 million. It surpassed consensus EPS estimates in three of the trailing four quarters.
The stock has gained 18.7% over the past year to close the last trading session at $21.77.
CCJ’s POWR Ratings reflect these solid prospects. The stock has a B grade for Momentum and Sentiment. Within the same industry, it is ranked #26. Click here to see the other ratings of CCJ for Growth, Value, Stability, and Quality.
RYI shares were trading at $22.12 per share on Tuesday afternoon, up $1.44 (+6.96%). Year-to-date, RYI has declined -14.41%, versus a -18.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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