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7 Stocks to Play the Booming Steel Industry

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The steel industry is one that is favorably correlated to strength in both the construction and auto sectors. And as we have seen in the last few months, there are multiple tailwinds driving these two sectors.

Additionally, steel is also used to build factory and farm machinery, as well as household appliances, packaging and many other things. So the expected broader recovery is also a positive for steel.

Domestic steel producers also enjoy the protection of tariffs on steel imports established by the Trump administration back in 2018. Biden may or may not continue these tariffs, but four steel organizations including the AISI, the Steel Manufacturers Association and the United Steelworkers union have already written to him saying that a weakening of these measures in the face of significant overcapacity at steel producing countries as well as subsidies and other trade distorting policies will invite a surge in imports with devastating effects to domestic steel producers and their workers.

Meanwhile, strong demand, declining imports, as well as COVID-related factory shutdowns and operating restrictions have led to robust steel prices. While capacity utilization at steel factories has risen over the past year, at 77.4% in the week ending Mar 6, it is not notably higher than the pre-pandemic year-ago level of 76.2%.

Biden’s poll promises also included a massive $2 trillion in infrastructure spending to repair and rebuild the country’s roads and bridges. But the Democrats’ goal of including clean energy investments in this could hold things up at the Senate. With the fresh stimulus out of the way, the government is widely expected to focus on infrastructure next. And any big push in infrastructure will be a big boost to steel.

So given the strong outlook for steel companies, it isn’t surprising that there are many buying opportunities among steel producers. The industry itself carries a Zacks Rank of 7 out of 250+ Zacks-classified industries, which places it in the top 3%.

#1 (Strong Buy) ranked ArcelorMittal (MT - Free Report) has a Value Score A, Growth Score B and Momentum Score B.

Luxembourg-based ArcelorMittal is the world’s leading steel and mining company with cost competitive steel plants across both the developed and developing world. It has a presence in more than 60 countries. It caters to the automotive, household appliances, packaging and construction markets.

Revenue and earnings are currently expected to grow 9.2% and 714.3% in 2021 before dropping off in 2022.

#1 (Strong Buy) ranked Nucor Corp. (NUE - Free Report) has a Value Score B, Growth Score B and Momentum Score A.

Charlotte, NC-based Nucor is a leading producer of structural steel, steel bars, steel joists, steel deck and cold finished bars in the U.S. It also produces direct reduced iron (“DRI”) that is used in its steel mills. The company has 123 operating facilities, primarily in the U.S. and Canada. Most of its operating facilities and customers are in North America.

Revenue and earnings are currently expected to grow 34.2% and 90.4% in 2021 and then decline in 2022.

#1 (Strong Buy) ranked Steel Dynamics, Inc. (STLD - Free Report) has a Value Score B, Growth Score C and Momentum Score A.

Fort Wayne, IN-based Steel Dynamics is among the leading steel producers and metal recyclers in the United States with steelmaking and coating capacity of more than 11 million tons. The company sells steel products, recycled ferrous and nonferrous metals, as well as steel joist and decking products in the U.S. and internationally.

Revenue and earnings are currently expected to grow 26.0% and 90.9% in 2021 before dropping off in 2022.

#1 (Strong Buy) ranked Schnitzer Steel Industries, Inc. (SCHN - Free Report) has a Value Score C, Growth Score B and Momentum Score A.

Schnitzer Steel collects, processes and recycles metals by operating one of the largest metals recycling businesses in the United States. It also manufactures finished steel products at its technologically advanced steel mini-mill.

Revenue and earnings are currently expected to grow 42.8% and 690.7% in 2021 before dropping off in 2022.

#1 (Strong Buy) ranked Olympic Steel, Inc. (ZEUS - Free Report) has a Value Score A, Growth Score A and Momentum Score A.

It is a leading U.S. metals service center focused on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel and aluminum products. Its CTI subsidiary is a leading distributor of steel tubing, bar, pipe, valves and fittings, as well as the fabrication of pressure parts for the electric utility industry.

Earnings are currently expected to grow 843.2% in 2021 and then decline in 2022. Revenue growth estimates aren’t available.

#1 (Strong Buy) ranked POSCO (PKX - Free Report) has a Value Score A, Growth Score A and Momentum Score A.

POSCO, formerly known as Pohang Iron & Steel Company Ltd., manufactures hot and cold rolled steel products, heavy plate and other steel products for the construction and shipbuilding industries.

Earnings are currently expected to grow 73.5% in 2021. Revenue growth estimates aren’t available.

#1 (Strong Buy) ranked L.B. Foster Company (FSTR - Free Report) has a Value Score A, Growth Score B and Momentum Score B.

It is engaged in the manufacture, fabrication and distribution of rail and trackwork, piling, highway products and tubular products. It also sells and rents steel sheet piling and H-bearing pile for foundation and earth retention requirements in the construction industry. For tubular markets, foster supplies pipe and pipe coatings for pipelines and produces pipe-related products for special markets.

Revenue and earnings are currently expected to grow 4.7% and -62.0% in 2021 before picking up in 2022.

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+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities

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