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4 Mining Equipment Stocks in Focus as Mining Sector Shows Promise

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Last year, an unprecedented crisis in the form of COVID-19 pandemic crippled the global economy. While some industries came to a standstill, others thrived. The mining sector was among the few that were severely affected at the beginning of the year due to weak demand. Also, miners had to suspend production, slow down project construction or curb operations as governments took actions to check the spread of the coronavirus. However, subsequently through the year mining was declared as an essential service by various governments, and miners were allowed to resume operations with safety precautions in place. The sector soon regained its footing on the back of improving commodity prices as well as solid demand from the top consumer China as it recovered from the pandemic-induced slump.

To stay afloat in the uncertain times, miners aggressively cut down operational costs and postponed capital spending and took steps to improve operating efficiency. They simplified their portfolio, shed non-core assets and reduced debt levels. These actions, along with the rally in commodity prices, have worked in the favor of miners this year and are getting reflected in their earnings performance. Miners are also hiking capital spending.  They are now focusing more on advanced technology and automation that will drive efficiency gains to remain competitive.

Speaking at in Bernstein 37th Annual Strategic Decisions Conference, Caterpillar Inc. (CAT - Free Report) ’s chief executive officer Jim Umpleby pointed toward a “long healthy cycle” in mining and strong commodity prices. He also highlighted that the energy transition has immense potential for Caterpillar in the long haul. The intensifying global focus on shifting from fossil fuels to zero emissions will require huge amount of commodities. This will lead to higher demand for mining equipment.

Per a Research and Markets report, the global market for mining equipment, which was estimated at $119 billion in 2020, is projected to witness a CAGR of 6.1% and hit $179.8 billion by 2027. Metal mining is projected to record a 7.6% CAGR and attain $83.5 billion by 2027.

Stocks That Will Gain on Mining Growth

Caterpillar: Given its leading product and services portfolio in mining, Caterpillar is well poised to capitalize on growth in the sector. Caterpillar continues to focus on customers and in the future by continuing to invest in digital capabilities, connecting assets and job sites along with developing the next generation of more productive and efficient products. Caterpillar reached its target of 1 million connected assets in 2019. The combination of innovation, cutting-edge technology, coupled with the formidable reputation, sets Caterpillar apart from its peers.  The company plans to fund initiatives that drive long-term profitable growth, focused on areas of expanded offerings and services and digital initiatives like e-commerce. Savings from its restructuring actions might also boost margins.

The Zacks Consensus Estimate for the company’s ongoing-year earnings has moved up 1% over the past 30 days. The consensus estimate for the current year indicates growth of 47.3% from the year-ago reported number. The company delivered a trailing four-quarter earnings surprise of 41.6%, on average. Notably, Caterpillar has an estimated long-term earnings growth rate of 12%. The Zacks Ranked #2 (Buy) stock has gained 39.4% in the past six months.

Komatsu Ltd (KMTUY - Free Report) : Headquartered in Tokyo, Japan, Komatsu manufactures and sells construction, mining and utility equipment; and forest and industrial machinery worldwide.

Komatsu continues to strengthen the Autonomous Haulage System (AHS), in sync with its growth strategies. The company has increased the total number of AHS trucks in operation to 352 units in fiscal 2020, surpassing its target of 330 units. Komatsu also continues to accelerate the speed of achieving digital transformation at construction workplaces through SMARTCONSTRUCTION, which will provide it a competitive edge. The company is further developing its product portfolio. Moreover, it will benefit from its cost-reduction efforts. Additionally, higher iron, copper and gold prices will translate into improving orders for mining machinery.

The Zacks Consensus Estimate for the company’s current-year earnings has been revised upward 2% over the past 30 days. The company pulled off a trailing four-quarter earnings surprise of 32.9%, on an average. Komatsu has an estimated long-term earnings growth rate of 9.3%. The stock has gained 15.9% in the past six months and currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Terex Corporation (TEX - Free Report) : The Westport, CT-based company is a global manufacturer of aerial work platforms, materials processing machinery and cranes.

Terex is poised to gain on its “Execute, Innovate, Grow” strategy that will focus on driving cash flow and profitability, Per the “Execute” theme, the company continues the progress made with “Execute to Win” by intensifying process discipline and implementing several new operational processes, among other initiatives. The “Innovate” theme seeks to continuously develop its product offerings and applying technology. The company has invested in connected assets and digital capabilities to better serve customers. The “Grow” aspect focuses on increasing inorganic investment and adding scope thorough acquisitions. This strategy will drive growth in the years to come. The company’s efforts to right size its cost structure will help boost margins.

The Zacks Consensus Estimate for the company’s earnings for the ongoing year has moved 2% north over the past 30 days. The consensus estimate indicates year-over-year growth of 1,815%. This Zacks #3 (Hold) Ranked stock has surged 60% in the past six months.

Hitachi Construction Machinery Co., Ltd. (HTCMY - Free Report) : Headquartered in Tokyo, Japan, Hitachi Construction Machinery Co., Ltd., together with its subsidiaries, engages in the manufacture, sale, rental, and service of construction and mining machinery, environmental related products, and other machines and devices worldwide.

The company focuses on providing superior machinery, as well as elevating total customer satisfaction by deepening the value chain, including parts and service, used machinery, rental, parts remanufacturing and finance. The company is focusing on accelerating the promotion of technological development for reducing Co2 emission. It will gain on improving demand for hydraulic excavators.

At present, the stock carries a Zacks Rank of 3. The Zacks Consensus Estimate for the current year's earnings indicates year-over-year growth of 273%. The company’s shares have appreciated 22.4% in the past six months.

Zacks Investment ResearchImage Source: Zacks Investment Research

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