Over the past year, the steel industry has faced several economic and geopolitical difficulties. However, with the rapid pace of urbanization and industrialization worldwide, the steel industry’s growth trajectory looks bright. Moreover, strong demand from the automotive, manufacturing, and infrastructure sectors strengthens the industry’s outlook.
In light of this, we think it could be wise to capitalize on the industry’s strong momentum by investing in fundamentally strong steel stocks Nippon Steel Corporation (NPSCY), Voestalpine AG (VLPNY) and Acerinox, S.A. (ANIOY) in July. Let’s understand this in detail.
Last year, the recovery momentum following the pandemic shock was impeded by high inflation, increasing interest rates, the Russia-Ukraine war, and China’s lockdowns. As a result, steel-using sectors experienced a decline in activity leading to a worse-than-expected contraction in steel demand.
Despite these macroeconomic challenges, steel demand is expected to increase steadily this year and beyond. The World Steel Association projects a 2.3% rebound in steel demand for 2023, reaching 1,822.3 million tonnes (mt), and 1.7% growth in 2024, reaching 1,854.0 mt. The rapidly growing industrialization and urbanization across the globe would primarily contribute to sustained steel demand.
Steel is widely used in various sectors, from building and infrastructure, automotive, and manufacturing to electrical appliances. Moreover, the steel industry would largely benefit from the infrastructure projects undertaken by the government under the Bipartisan Infrastructure Law, which has awarded over $220 billion in funding for several infrastructure projects.
Furthermore, the rising implementation of sustainable practices and the recyclability of steel contribute toward the industry’s expansion. The steel industry has been actively exploring carbon capture technologies to reduce emissions and delving into green steel, i.e., manufacturing without relying on fossil fuels.
According to a report by Allied Market Research, the global carbon steel market is projected to grow at a CAGR of 3.6%, reaching $1.30 trillion by 2032. Moreover, the VanEck Steel ETF’s (SLX) 27.8% returns over the past nine months illustrate investors’ interest in steel stocks.
Given the favorable industry outlook, investing in fundamentally sound steel stocks NPSCY, VLPNY, and ANIOY this month could be wise for solid returns.
Let’s discuss the fundamentals of these stocks in detail.
Nippon Steel Corporation (NPSCY)
Headquartered in Tokyo, Japan, NPSCY engages in steelmaking, fabrication, engineering, construction, and materials businesses. It supplies steel products, such as plates, sheets, and rods, alongside titanium and stainless materials for the automotive, energy, infrastructure, and electronics sectors.
On June 16, NPSCY unveiled the addition of ZEXEED™ Checkered Sheet to its range of highly corrosion-resistant coated steel sheets. By harnessing the exceptional corrosion resistance of ZEXEED and the new product, NPSCY can fulfill customer requirements, minimize life cycle costs by extending equipment lifespan, tackle aging infrastructure, and optimize processes amidst a declining workforce.
For the year ended March 31, 2023, NPSCY’s revenue increased 17.1% year-over-year to ¥7.98 trillion ($55.20 billion). Its gross profit grew 5.9% from the prior year to ¥1.29 trillion ($8.95 billion). Also, the company’s profit for the year and EPS rose 10.7% and 2.2% year-over-year to ¥738.73 billion ($5.11 billion) and ¥671.89, respectively.
The consensus revenue estimate of $15.84 billion for the first quarter ended June 2023 reflects a 9.7% year-over-year improvement. Likewise, the consensus revenue estimate of $15.58 billion for the second quarter (ending September 2023) indicates an 18.1% rise year-over-year. Moreover, the company surpassed the consensus revenue estimates in three of the trailing four quarters.
The stock has gained 16.6% over the past six months and 47.7% over the past year to close the last trading session at $6.87.
NPSCY’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
NPSCY has a B grade for Value, Stability, and Momentum. It has ranked #4 in the A-rated 33-stock Steel industry.
In addition to the POWR Ratings I’ve just highlighted, you can see NPSCY’s ratings for Growth, Quality, and Sentiment here.
Voestalpine AG (VLPNY)
Based in Linz, Austria, VLPNY processes, develops, manufactures, and sells steel products. Its segments include Steel; High-Performance Metals; Metal Engineering; Metal Forming; and Other. The company’s offerings comprise steel strips, heavy plates, and turbine casings for various industries such as automotive, construction, and energy.
On March 9, VLPNY revealed its largest-ever order valued at around €237 million ($258.25 million) for turnouts, drives, and rail technology, including diagnostic systems for the High Speed 2 rail network in Great Britain. Such major projects are expected to enhance the company's growth prospects.
For the fiscal year ended March 31, 2023, VLPNY’s revenues increased 22.1% year-over-year to €18.23 billion ($19.86 billion). The company’s EBITDA rose 11.1% from the previous year to €2.54 billion ($2.77 billion). Furthermore, its profit after tax from continuing operations came in at €1.09 billion ($1.18 billion), a 1.2% year-over-year increase.
VLPNY’s revenue is expected to grow 1.3% year-over-year to $4.82 billion for the fiscal 2024 first quarter that ended June 2023. Also, the company topped the consensus revenue estimates in all four trailing quarters, which is impressive.
Over the past year, the stock has gained 75.8% to close the last trading session at $7.05.
VLPNY’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
VLPNY has an A grade for Value and a B for Stability, Quality, and Momentum. It has topped the 33-stock Steel industry.
Click here to access additional VLPNY ratings (Growth and Sentiment).
Acerinox, S.A. (ANIOY)
ANIOY, headquartered in Madrid, Spain, manufactures, transforms, and markets stainless steel products. Its offerings include coil cold rollings, hot rolled coils, roughing materials, discs, billets, and plates. The company also provides steel wires, corrugated wires, hexagonal wire rods, bars, rebars, steel profiles, and corrugated hot rolls.
On January 26, ANIOY unveiled a $244 million investment plan for its largest stainless-steel factory, North American Stainless (NAS), in the United States. The investment aims to enhance the production of flat products, mainly focusing on higher value-added varieties such as Bright Annealing and special composition steels.
This initiative could bolster ANIOY’s presence in the United States and fortify its leadership position. Additionally, it will reaffirm the company's unwavering commitment to NAS, one of the world’s most efficient stainless steel manufacturing facilities, responsible for approximately 50% of the nation's stainless-steel production.
For the first quarter that ended March 31, 2023, ANIOY’s revenue increased 5% quarter-over-quarter to €1.78 billion ($1.94 billion). The company’s EBITDA rose 150% from the quarter-ago period to €226 million ($246.26 million).
In addition, as of March 31, 2023, the company’s current assets stood at €4.66 billion ($5.08 billion), compared to €4.42 billion ($4.81 billion) as of December 31, 2022. Also, its total assets amounted to €6.56 billion ($7.15 billion), compared to €6.32 billion ($6.88 billion) as of December 31, 2022.
Shares of ANIOY have gained 16.8% over the past year to close the last trading session at $5.14.
ANIOY’s solid outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
ANIOY has an A grade for Value and a B for Stability, Momentum, and Quality. It has ranked #2 out of 33 stocks within the same industry.
Click here to access additional ANIOY ratings for Growth and Sentiment.
What To Do Next?
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NPSCY shares were trading at $7.03 per share on Wednesday afternoon, up $0.16 (+2.33%). Year-to-date, NPSCY has gained 18.35%, versus a 16.73% 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.
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