Lift your investment portfolio with these three steel stocks

Following the slowdown in demand and inventory disposal measures taken last year, the global steel industry is expected to witness a recovery in demand this year. Given this backdrop, investors could consider buying mainly strong steel stocks Companhia Siderúrgica (SID), Reliance (RS) and Acerinox (ANIOY). Read on.

Despite persistent headwinds, the steel industry is expected to expand due to rising demand from developing countries like India, favorable government policies focusing on infrastructure development, rapid urbanization, recovery in demand in China, and technological progress.

Given the bright prospects for this industry, it may be wise to consider investing in mainly solid steel stocks Companhia Siderúrgica Nacional (sir), Reliance Company (rupee) and Acerinox, S.A. (I intend to).

Before we dive into the fundamentals of these stocks, let’s understand what shapes the steel industry’s prospects.

The steel industry is an essential component of the global economy, with steel used in various applications, including construction, transportation, energy, and packaging. The global steel market is expected to grow at a rate 2.8% compound annual growth rate To reach $1.08 trillion by 2028.

The global steel market received a strong blow last year, as China, the world’s largest steel consumer, experienced economic difficulties due to the real estate crisis. The steel market also suffered due to weak growth in several large economies, which led to lower sales.

Inventory disposal was one of the main reasons why steel companies’ profit margins were shrinking. According to the World Steel Association, global crude steel production reached 148.1 million tons in January 2024, representing 148.1 million tons in January 2024. decreased by 1.6% From January 2023.

Major steel manufacturer ArcelorMittal SA (metric tonsAlthough real steel demand is likely to remain weak this year, demand is clearly showing signs of improvement as the destocking process reaches maturity, he said. Visible global steel demand, excluding China, is expected to grow by 100%, said Genuino Cristino, CEO of MT. 3% to 4% annually in 2024.

The Chinese economy is expected to continue its recovery with a host of stimulus measures announced by the government that are expected to support demand growth from infrastructure spending. Steel consumption in China is expected to grow by between 0 and 2%.

Fitch Ratings believes that demand for steel will continue to grow in most regions, with global consumption rising by 20 million tons and 30 million tons this year compared to 2023. India will lead demand growth, and Turkey will continue its strong recovery. Europe, the United States and Brazil will see demand grow at a moderate pace.

Moreover, the steel industry is about to enter a period of transformation, driven by advances in artificial intelligence and robotics. These technologies have the potential to transform the industry by increasing automation, enhancing quality control, optimizing the supply chain, enabling predictive maintenance, and much more.

Steelmakers may use artificial intelligence and robotics to improve efficiency, cut costs and reduce downtime. Investor interest in steel stocks is evident from the VanEck Steel ETF (SLX) 17.5% returns over the past nine months.

With these positive trends in mind, let’s dive into the basics of all three steel Picks stocks, starting with the third pick.

Stock No. 3: Companhia Siderúrgica Nacional (sir)

Headquartered in São Paulo, SID is an integrated steel producer in Brazil and Latin America. It operates through five sectors: steel, mining, logistics, energy and cement.

SID’s trailing 12-month capex/sales of 8.62% is 13.6% higher than the industry average of 7.59%.

For the third fiscal quarter ending September 30, 2023, SID’s net sales revenue increased 2.1% year-over-year to R$11.13 billion ($2.24 billion). Its gross profit and Adjusted EBITDA They amounted to R$2.81 billion ($565.76 million) and R$2.82 billion ($567.76 million), an increase of 10.5% and 3.7% year-on-year, respectively.

In the same quarter, its net income amounted to 90.79 million Brazilian reais ($18.31 million). As of September 30, 2023, SID’s current liabilities amounted to R$20.68 billion ($4.17 billion), compared to R$21.39 billion ($4.31 billion) as of September 30, 2022.

Street expects SID’s EPS for the quarter ending December 31, 2023 to increase significantly year over year to $0.19. Its revenue is expected to increase 8.6% year over year to $2.35 billion for the same period. Over the past six months, the stock has risen 34% to close the last trading session at $3.31.

SID Energy ratings This reflects a promising outlook. It has an overall rating of B, equivalent to a Buy in our rating system. POWR Ratings evaluates stocks across 118 different factors, each of which carries its own weight.

It has a grade of B for growth and stability. Under the classification A steel Industry, ranked No. 15 out of 31 stocks. To see SID’s rating for Value, Momentum, Sentiment and Quality, click here.

Stock #2: Reliance, Inc. (rupee)

RS operates as a diversified metal solution provider and metal service center company. The company distributes approximately 100,000 metal products and provides metal processing services for general manufacturing, non-residential construction, transportation, aerospace, energy, electronics, semiconductor manufacturing and heavy industries.

On February 14, 2024, RS announced that it has signed a definitive agreement to acquire all of the outstanding equity interests and related real estate assets of American Alloy Steel, Inc., a leading distributor of specialty carbon and alloy steel sheets and round bars, including PVQ materials.

This acquisition will expand RS’s product portfolio and market position in the specialty carbon and alloy steel industries. This is expected to improve the research sector’s ability to serve clients across a variety of industries, including energy, defense and manufacturing.

RS’s trailing 12-month ROTA of 12.75% is 350.2% higher than the industry average of 2.83%. The trailing 12-month ROTC ratio of 12.03% is 137% higher than the industry average of 5.08%. Additionally, its 12-month return on equity (ROCE) of 18.04% is 190.9% higher than the industry average of 6.20%.

RS’s net sales for the fiscal fourth quarter (ending December 31, 2023) were $3.34 billion, while its operating income was $325.10 million. The company’s non-GAAP net income attributable to RS and non-GAAP EPS were $274.40 million and $4.73, respectively.

Moreover, the company’s current liabilities totaled US$843.60 million as of December 31, 2023, compared to US$1.38 billion as of December 31, 2022.

Over the past nine months, the stock has risen 33.8% to close the last trading session at $320.26.

Not surprisingly, the RS gets an overall rating of B, which equates to a Buy in our POWR ratings system.

It has a grade of B for sentiment and quality. It is ranked No. 14 in the same industry. In addition to above, we also rate RS in terms of Growth, Value, Momentum and Stability. Get all RS ratings here.

Stock #1: Acerinox, SA (I intend to)

Headquartered in Madrid, Spain, ANIOY manufactures, transforms and markets stainless steel products. Its offerings include cold rolled coils, hot rolled coils, raw materials, discs, bars, and plates.

On February 5, 2024, ANIOY announced that it has entered into a definitive agreement under which North American Stainless (NAS), Acerinox’s wholly-owned U.S. subsidiary, will acquire Haynes International, a leader in the development, manufacture and marketing of advanced high-tech products. Performance alloys.

This acquisition will enable Acerinox to expand its product offerings and improve its position in the high-performance alloys industry.

ANIOY’s trailing 12-month return on equity (ROCE) of 9.34% is 50.7% higher than the industry average of 6.20%. Its 12-month ROTA of 3.74% is 32.1% higher than the industry average of 2.83%. Additionally, the 12-month asset turnover ratio of 1.07x is 56.4% higher than the industry average of 0.68x.

ANIOY’s net sales were €1.53 billion ($1.66 billion) in the fiscal fourth quarter ended December 2023. The company’s EBITDA was €96 million ($104.37 million), up 6.7% year-over-year.

Additionally, as of December 31, 2023, the Company’s current liabilities were €1.90 billion ($2.07 billion), compared to €1.95 billion ($2.12 billion) as of December 31, 2022.

For the quarter ending June 30, 2024, ANIOY’s revenues are expected to increase 1.1% year over year to $1.95 billion. Over the past six months, the stock has risen 5.1% to close the last trading session at $5.20.

ANIOY’s strong fundamentals are reflected in its POWR ratings. It has an overall rating of A, which equates to a Strong Buy in our rating system.

It ranks second in the steel industry. It has a grade of B for value, stability and quality. To see additional ANIOY ratings for Growth, Momentum and Confidence, click here.

What to do next?

Steve Reitmeister, a 43-year investing veteran, has released his 2024 market predictions along with his trading plan and top 11 picks for next year.

Stock market predictions for 2024>

RS shares were unchanged in premarket trading on Wednesday. Year to date, the RS has risen 14.51%, versus a 6.71% rise in the benchmark S&P 500 over the same period.

About the author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management and financial regulatory issues, which led her to pursue a career as an investment analyst. With a Master’s degree in Commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.

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