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Metal Stocks Q2 Earnings to Watch on Jul 21: RS, VMI
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Last year, metal companies saw millions being wiped out due to the slowdown in China and a subsequent crash in commodity prices. In the wake of falling demand, the only key to stay afloat was to control costs. Saddled with debt, few companies had to divest underperforming assets.
This year, the industry seems to have staged a comeback. Alcoa, Inc. (AA - Free Report) kick-started the second-quarter earnings season in style, beating expectations despite depressed aluminium prices. Alcoa remained optimistic about its forecast of demand, outpacing supply in 2016. This should bode well for future aluminum prices. The company’s positive outlook for the automotive and construction sectors augurs well for the steel industry.
As it is, gold and silver are major movers this year, gaining 24% and 44% respectively, thanks to the slowdown in China, volatile equity markets due to Brexit and a dovish Fed and introduction of negative interest rates by several central banks (including Japan).
Iron-ore prices have also been on an upward trajectory, triggered by the “big three” producers - BHP Billiton Ltd. BHP , Rio Tinto plc RIO , and Vale S.A. VALE, trimming their full-year iron production guidance. In addition, fresh stimulus measures introduced by the Chinese government to boost steel production, which implies a revival in the country’s property construction sector, led to the upswing.
Copper prices have also gained 7% so far, this year. Prices gained in March and again in May, on the back of huge jump in imports in China – the top consumer. Lately, Brexit fears also aided support prices. Recently, expectations of a fresh economic stimulus in Europe and China buoyed demand for the metal.
What Do the Numbers Say?
As per the Zacks Industry classification, the mining industry is grouped under the Basic Material sector – one of the 16 broad Zacks sectors. The 10% of the companies in this sector that have reported so far put up a 16% fall in earnings on the scoreboard. Nevertheless, the sector has a strong blended ratio (the proportion of companies with both top- and bottom-line beats) of 50%. Considering the companies that are yet to report, the sector’s earnings are expected to drop 15.1% in the quarter.
However, it is not the only sector to suffer an earnings decline this quarter. Earnings growth is anticipated to be in the negative territory for 9 of the 16 Zacks sectors, with Energy being the biggest laggard. Apart from Basic Materials, Transportation is also expected to see a double-digit decline. Looking at the projected estimates for the still-to-report 468 companies, total S&P 500 earnings are expected to be down 5.9% on the back of a 0.5% dip in revenues. It seems the quarter is on track to be the 5th quarter, in row of earnings declines. (Read more: Early Read on the Q2 Earnings Season?).
Let’s see what’s in store for these metal stocks that are set to report quarterly numbers on Jul 21.
Reliance Steel & Aluminum Co. (RS - Free Report) operates as a metals service center company. Last quarter, the company had delivered a positive earnings surprise of 17.05%. Its four-quarter average beat is 10.95%.
Reliance Steel should benefit from enhanced pricing environment, improving steel market conditions in the U.S as well as synergies from acquisitions in the second quarter. Reliance Steel’s Earnings ESP of +3.05% and a Zacks Rank #2 (Buy) indicates a likely positive earnings surprise. (Read more: Can Reliance Steel Maintain Its Earnings Streak in Q2?)
Valmont Industries, Inc. (VMI - Free Report) produces and sells fabricated metal products in the United States as well as internationally. Last quarter, the company had delivered a positive earnings surprise of 18.25%. Its four-quarter average beat is 2.49%.
While the prevailing external environment continues to be challenging for Valmont, the company expects to benefit from restructuring actions, cost management and a focus on operational improvements moving ahead. Valmont should also gain from acquisitions and its efforts to boost its market position through investments toward developing its product line.
Valmont Industries is likely to miss expectations this season due to the combination of its Zacks Rank #3 (Hold) and Earnings ESP of -0.58%.
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Metal Stocks Q2 Earnings to Watch on Jul 21: RS, VMI
Last year, metal companies saw millions being wiped out due to the slowdown in China and a subsequent crash in commodity prices. In the wake of falling demand, the only key to stay afloat was to control costs. Saddled with debt, few companies had to divest underperforming assets.
This year, the industry seems to have staged a comeback. Alcoa, Inc. (AA - Free Report) kick-started the second-quarter earnings season in style, beating expectations despite depressed aluminium prices. Alcoa remained optimistic about its forecast of demand, outpacing supply in 2016. This should bode well for future aluminum prices. The company’s positive outlook for the automotive and construction sectors augurs well for the steel industry.
As it is, gold and silver are major movers this year, gaining 24% and 44% respectively, thanks to the slowdown in China, volatile equity markets due to Brexit and a dovish Fed and introduction of negative interest rates by several central banks (including Japan).
Iron-ore prices have also been on an upward trajectory, triggered by the “big three” producers - BHP Billiton Ltd. BHP , Rio Tinto plc RIO , and Vale S.A. VALE, trimming their full-year iron production guidance. In addition, fresh stimulus measures introduced by the Chinese government to boost steel production, which implies a revival in the country’s property construction sector, led to the upswing.
Copper prices have also gained 7% so far, this year. Prices gained in March and again in May, on the back of huge jump in imports in China – the top consumer. Lately, Brexit fears also aided support prices. Recently, expectations of a fresh economic stimulus in Europe and China buoyed demand for the metal.
What Do the Numbers Say?
As per the Zacks Industry classification, the mining industry is grouped under the Basic Material sector – one of the 16 broad Zacks sectors. The 10% of the companies in this sector that have reported so far put up a 16% fall in earnings on the scoreboard. Nevertheless, the sector has a strong blended ratio (the proportion of companies with both top- and bottom-line beats) of 50%. Considering the companies that are yet to report, the sector’s earnings are expected to drop 15.1% in the quarter.
However, it is not the only sector to suffer an earnings decline this quarter. Earnings growth is anticipated to be in the negative territory for 9 of the 16 Zacks sectors, with Energy being the biggest laggard. Apart from Basic Materials, Transportation is also expected to see a double-digit decline. Looking at the projected estimates for the still-to-report 468 companies, total S&P 500 earnings are expected to be down 5.9% on the back of a 0.5% dip in revenues. It seems the quarter is on track to be the 5th quarter, in row of earnings declines. (Read more: Early Read on the Q2 Earnings Season?).
Let’s see what’s in store for these metal stocks that are set to report quarterly numbers on Jul 21.
Reliance Steel & Aluminum Co. (RS - Free Report) operates as a metals service center company. Last quarter, the company had delivered a positive earnings surprise of 17.05%. Its four-quarter average beat is 10.95%.
RELIANCE STEEL Price and EPS Surprise
RELIANCE STEEL Price and EPS Surprise | RELIANCE STEEL Quote
Reliance Steel should benefit from enhanced pricing environment, improving steel market conditions in the U.S as well as synergies from acquisitions in the second quarter. Reliance Steel’s Earnings ESP of +3.05% and a Zacks Rank #2 (Buy) indicates a likely positive earnings surprise. (Read more: Can Reliance Steel Maintain Its Earnings Streak in Q2?)
Valmont Industries, Inc. (VMI - Free Report) produces and sells fabricated metal products in the United States as well as internationally. Last quarter, the company had delivered a positive earnings surprise of 18.25%. Its four-quarter average beat is 2.49%.
VALMONT INDS Price and EPS Surprise
VALMONT INDS Price and EPS Surprise | VALMONT INDS Quote
While the prevailing external environment continues to be challenging for Valmont, the company expects to benefit from restructuring actions, cost management and a focus on operational improvements moving ahead. Valmont should also gain from acquisitions and its efforts to boost its market position through investments toward developing its product line.
Valmont Industries is likely to miss expectations this season due to the combination of its Zacks Rank #3 (Hold) and Earnings ESP of -0.58%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>