The Russia-Ukraine war has aggravated global logistical disruptions and precipitated a surge in oil and gas prices. Since basic materials are inputs for many industries, the input price inflation has been a boon for the basic materials industry. Rising prices have been helping basic materials companies expand their profit margins.
Investors’ interest in the basic material space is evident in the Materials Select Sector SPDR ETF’s (XLB) 6% returns over the past three months. Supportive federal policies, like last year’s passage of a bi-partisan infrastructure bill, might also drive the basic materials industry’s growth.
Strong fundamentals make basic materials stocks Commercial Metals Company (CMC), Gold Fields Limited (GFI), FMC Corporation (FMC), Warrior Met Coal, Inc. (HCC), and Methanex Corporation (MEOH) solid bets now.
Commercial Metals Company (CMC)
CMC in Irving, Tex., manufactures, recycles, and fabricates steel and metal products and related materials and services in the United States, Poland, China, and internationally. The company processes and sells ferrous and nonferrous scrap metals.
On March 17, 2022, Barbara R. Smith, Chairman of the Board, President, and CEO said, “We look forward to building on CMC's already world-class assets and operating platform with the addition of Tensar Corporation and the commissioning of our energy efficient rebar and merchant bar-capable Arizona 2 micro mill project.”
CMC’s net sales increased 37.4% year-over-year to $2.01 billion in its fiscal year 2022 second quarter, ended Feb. 28, 2022. The company’s net earnings came in at $383.31 million, up 477.7% year-over-year. Its EPS came in at $3.12, up 467.3% year-over-year.
Analysts expect CMC’s revenue to increase 28.8% year-over-year to $8.67 billion in its fiscal 2022. Its EPS is estimated to grow 86.4% to $6.58 in 2022. Also, it surpassed EPS estimates in three of the trailing four quarters. The stock has gained 19.6% in price year-to-date to close yesterday’s trading session at $43.40.
CMC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
CMC has an A grade for Momentum and a B for Growth and Sentiment. Within the A-rated Steel industry, it is ranked #19 out of 34 stocks. Click here to see the additional POWR Ratings for Value, Stability, and Quality for CMC.
Gold Fields Limited (GFI)
Based in Sandton, South Africa, GFI is a gold producer with reserves and resources in Chile, South Africa, Ghana, West Africa, Australia, and Peru. The company also explores copper deposits. It holds interests in nine operating mines.
GFI’s revenue came in at $4.20 billion for the year ended Dec. 31, 2021, up 7.8% year-over-year. Its profit for the year came in at $829.50 million, up 11.3% year-over-year. Also, its EPS was 88 cents, up 8.6% year-over-year.
Analysts expect GFI’s revenue to be $4.47 billion for its fiscal period ending Dec. 31, 2022, representing a 6% year-over-year rise. The company’s EPS is expected to increase 100.5% per annum for the next five years. The stock has gained 27.4% in price year-to-date to close yesterday’s trading session at $14.00.
GFI’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Ratings system.
It has a B grade for Quality. It is ranked #8 of 37 stocks in the Miners - Gold industry. Click here to see the additional ratings for GFI (Growth, Value, Momentum, Stability, and Sentiment).
Click here to check out our Gold and Silver Industry Report for 2022
FMC Corporation (FMC)
FMC in Philadelphia, Pa., is an agricultural sciences company that provides crop protection, plant health, and professional pest and turf management products. It develops, markets, and sells crop protection chemicals.
On Feb. 28, 2022, FMC announced a three-year partnership with the National Council of Societies for the Prevention of the Cruelty to Animals (NSPCA). Karen Totland, FMC’s vice president and chief sustainability officer, said, “The future of agriculture, of our business and of society depend on companies like FMC creating a safe, healthy and inclusive environment in which to live and work. Our new partnership with the NSPCA demonstrates FMC's willingness to embrace that responsibility by supporting their stewardship and education programs in South Africa.”
For the fourth quarter ended Dec. 31, 2021, FMC’s revenue came in at $1.41 billion, up 22.7% year-over-year. Its non-GAAP adjusted earnings were $376.70 million, up 29.9% year-over-year. And its EPS came in at $1.52, up 300% year-over-year.
FMC’s revenue is expected to be $5.41 billion in its fiscal year 2022, representing a 7.2% year-over-year rise. The company’s EPS is expected to increase 13.5% year-over-year to $8.83 in 2023. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 24.7% in price year-to-date to close yesterday’s trading session at $137.01.
It is no surprise that FMC has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Quality.
FMC is ranked #24 out of 91 stocks in the A-rated Chemicals industry. Click here to see the additional POWR Ratings for FMC (Growth, Value, Momentum, Stability, and Sentiment).
Warrior Met Coal, Inc. (HCC)
HCC produces and exports non-thermal metallurgical coal for the steel industry. It operates two underground mines located in Alabama. The Brookwood, Ala., company sells its metallurgical coal to a customer base of blast furnace steel producers.
On Feb. 22, 2022, Dale Boyles, HCC’s CFO, said, “Our decision to refinance our senior notes and ABL facility at this time accomplishes several important goals. It enhances our already strong balance sheet and financial position, takes advantage of current low borrowing costs, modestly lowers our cash interest expense and furthers our financial flexibility as we pursue the creation of long-term shareholder value.”
HCC’s total revenues increased 95.8% year-over-year to $415.55 million for the fourth quarter, ended Dec. 31, 2021. Its net income came in at $138.49 million, compared to a $33.71 million loss in the previous period. Furthermore, its EPS came in at $2.68, compared to a $0.66 loss per share in the year-ago period.
For its fiscal 2022, analysts expect HCC’s revenue to be $1.41 billion, representing a 33.2% year-over-year rise. In addition, the company’s EPS is expected to increase 119.6% year-over-year to $9.73 in 2022. The stock has gained 33.1% in price year-to-date to close yesterday’s trading session at $34.23.
HCC has an overall B rating, which equates to a Buy in our POWR Ratings system. It has an A grade for Momentum and Quality and a B grade for Growth. Click here to see HCC’s rating for Value, Stability, and Sentiment. HCC is ranked #5 of 11 stocks in the A-rated Coal industry.
Methanex Corporation (MEOH)
Headquartered in Vancouver, Canada, MEOH produces and supplies methanol in North America, Asia-Pacific, Europe, and South America. The company also purchases methanol produced by others. It owns and manages a fleet of approximately 30 ocean-going vessels.
On January 26, 2022, John Floren, MEOH’s President & CEO, said, “Our capital allocation priorities remain the same. We are well positioned to maintain our business, pursue attractive growth opportunities and continue our long track record of returning excess cash to shareholders through a sustainable dividend and share buybacks.”
MEOH’s adjusted revenue increased 47% year-over-year to $1.11 billion in the fourth quarter, ended Dec. 31, 2021. Its adjusted net income came in at $185 million, up 1,441.7% year-over-year. The company’s adjusted EPS came in at $2.43, up 1,520% year-over-year.
MEOH’s EPS is expected to increase 28.7% per annum for the next five years. The stock has gained 33.8% in price year-to-date to close yesterday’s session at $52.92.
MEOH has an overall B rating, which equates to a Buy in our proprietary rating system.
In addition, it has a B grade for Value and Quality. MEOH is ranked #16 of 91 stocks in the Chemicals industry. Click here to see the additional POWR Ratings for MEOH (Growth, Momentum, Stability, and Sentiment).
CMC shares were trading at $42.68 per share on Friday morning, down $0.72 (-1.66%). Year-to-date, CMC has gained 18.45%, versus a -8.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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