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2 Top-Rated Steel Stocks to Buy Now

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Forty-year high inflation led to steel prices skyrocketing over the last few years and many companies that produce the metal have been able to benefit. The Steel-Producers Industry is currently in the top 4% of over 250 Zacks Industries, indicating this trend could continue.

With studies showing that roughly half of a stock’s price movement can be attributed to its industry group, here are two of the highest-ranked stocks in the Steel-Producers industry that investors may want to consider buying.

Nucor (NUE - Free Report)

Nucor stock may be one that got away from investors in recent years as it continued to rise. Currently sporting a Zacks Rank #1 (Strong Buy) the opportunity to get in on the next surge higher could be now.

The structural steel, steel bars, steel joists, steel deck, and cold-finished bars producer has continued to grow its business through lucrative acquisitions with its largest being C.H.I. Overhead Doors for $3 billion in 2022.

Nucor earnings are now projected to jump 21% for its current fiscal 2022 at $28.13 per share. Fiscal 2023 earnings are expected to decline -54% to $12.76 per share following a pair of very tough-to-compete-with years. Still, earnings estimate revisions have started to trend higher for FY23.

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Over the last year, shares of Nucor are up 26% to largely outperform the S&P 500’s -20% and the Steel-Producers Markets -4%. Plus, over the last three years, NUE’s total return including dividends is +187% to also beat the benchmark and its Zacks Subindustry’s +69%.

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Trading around $144 per share and 23% from its highs Nucor stock trades at just 4.8X earnings. Nucor shares trade 88% below their decade high of 41.4X and are still at a 68% discount to the median of 15.5X.

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Steel Dynamics (STLD - Free Report)

Another steel producer stock carrying a Zacks Rank #1 (Strong Buy) is Steel Dynamics. As one of the most diversified steel companies in the U.S. Steel Dynamics makes and markets steel products, processes and sells recycled ferrous and nonferrous metals, and fabricates and sells steel joist and decking products. 

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Steel Dynamics earnings are expected to climb 36% for its fiscal 2022 at $21.97 per share. Fiscal 2023 earnings are expected to plummet -51% to $10.82 a share after a tough year to follow. However, earnings estimate revisions have largely gone up for both FY22 and FY23 over the last quarter.

Steel Dynamics is now up +65% over the last year to crush the S&P 500’s -20% and the Steel-Producers Markets -4%. Even better, looking at the last three years STLD’s total return is a very impressive +226% to beat the benchmark and its Zacks Subindustry’s +69%

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Despite Steel Dynamics stock soaring over the last few years its trades at just 4.6X earnings. This is 80% below its decade high of 24.2X and a 62% discount to the median of 12.2X.

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Bottom Line

The growth of Nucor and Steel Dynamics has been impressive over the last two years, and their valuations appear to support more upside ahead with earnings estimate revisions mostly trending higher.

Both stocks also offer respectable dividends to support what could be another year of outperforming the broader market and being a defensive option for investors to hedge against inflation.


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