President Donald Trump announced on March 1, 2018 that United States will impose a 25% tariff on steel imports the week after. The U.S. Commerce Department recently recommended Trump's administration to impose heavy tariffs on imported steel from 12 selected countries, including China and Brazil. Trump’s opposition to using imported steel, coupled with his promise to boost manufacturing, bodes well for the U.S. steel industry. The president plans to put 1.5 trillion dollars into infrastructure. In addition, relaxed regulations and corporate tax cuts promise to make the materials sector prosperous. (See also: Trump's Wall Could Be Great News for Steel Stocks.)
All this will help the steel industry, and indeed, companies focused primarily on steel have been gaining over the last twelve months. Here are four that appear poised for future gains.
Note: These stocks were chosen based on industry focus, U.S. business, market cap and return. Data is reported as of March 1, 2018.
Nucor Corporation (NUE)
- Avg. Volume: 3.1 million
- Market Cap: $21.10 billion
- EPS (TTM): $4.10
- Dividend Yield: 2.26%
- Price: $66.54
- 1y Target Est: $73.77
Nucor is the largest steel manufacturer in the U.S. by market cap at $21.10 billion. The company is a leading U.S. steel provider with its headquarters in Charlotte, North Carolina. Its operations include steel mills, steel products and raw materials. It is heavily involved in construction, which positions Nucor to profit from Trump’s focus on infrastructure. Its connections in the construction of highways, bridges, hospitals, schools and airports put it squarely in the sights of Trump’s building plans. In addition, Nucor has a strong presence in the auto industry and the energy sector. This is no newcomer to the steel business. The company dates back to 1940.
The stock is trading at $66. It has a 1 year return of 6.94% as of 3/1/18.
Steel Dynamics Inc. (STLD)
- Avg. Volume: 2.7 million
- Market Cap: $11.1 billion
- EPS (TTM): $2.38
- Dividend Yield: 1.34%
- Price: $46.79
- 1y Target Est: $52.08
Steel Dynamics has a market cap of $11.1 billion. 1 year return is leading the industry at 28.06%. In 2018, analysts expect revenue to increase from $9.6 billion to $10.09 billion. Earnings per share are also expected to increase from $2.72 to $3.98.
The company manufactures and recycles steel products. It works in sheet steel, coated steel, steel beams, rails and steel bars. The company also has an extensive scrap metal operation.
Reliance Steel and Aluminum (RS)
- Avg. Volume: 457,900
- Market Cap: $6.6 billion
- EPS (TTM): $6.56
- Dividend Yield: 2.00%
- Price: $91.62
- 1y Target Est: $93.88
Reliance Steel and Aluminum has a market cap of $6.6 billion. 1 year return is 8.65%. It also has a relatively low price to earnings ratio of 16.77.The company provides global metals services. It manages a network of metals service centers worldwide with business operations in 13 countries. The stock is trading at $91. Analysts have a high target price for the stock of $92.
United States Steel (X)
- Avg. Volume: 11.7 million
- Market Cap: $7.7 billion
- EPS (TTM): $2.19
- Dividend Yield: 0.45%
- Price: $43.89
- 1y Target Est: $44.23
United States Steel recorded a one year return of 12.89%. The company was founded in 1901 and has its headquarters in Philadelphia, Pennsylvania. It provides steel products and solutions for infrastructure, automotive, appliance, container, industrial machinery, construction and energy companies.
Analysts are expecting 2018 revenue to increase from $12.37 billion to $13.48 billion. Earnings per share is also expected to increase from $1.96 to $4.15. The company has a market cap of $7.7 billion. It is trading at $43.89.
The Bottom Line
In the information age, it is easy to think of steel as an old-fashioned industry that has seen better days. The truth is, steel is coming into its own once again as a vital product. If the United States leads the way in rebuilding infrastructure, steel stocks could be a superior investment. (See also: Democrats Propose $1 Trillion Infrastructure Plan.)
