The materials sector includes companies engaged in the discovery, development, and processing of raw materials, which are used across a broad range of sectors and industries. Materials stocks include manufacturers of products as varied as plastic, fertilizer, paper, concrete, and metals. Prominent names include Ecolab Inc. (ECL), Air Products and Chemicals Inc. (APD), and DuPont de Nemours Inc. (DD).
Materials stocks, as represented by the Materials Select Sector SPDR ETF (XLB), have underperformed the broader market, providing investors with a total return of 10.1% compared to the Russell 1000's total return of 13.4% over the past 12 months. These market performance numbers are as of September 25 and the statistics in the tables below are as of September 28.
Here are the top 3 materials stocks with the best value, the fastest earnings growth, and the most momentum.
Best Value Materials Stocks
These are the materials stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
|Best Value Materials Stocks|
|Price ($)||Market Cap ($B)||12-Month Trailing P/E Ratio|
|Huntsman Corp. (HUN)||21.36||4.7||4.9|
|LyondellBasell Industries NV (LYB)||69.62||23.2||11.5|
|Steel Dynamics Inc. (STLD)||28.86||6.1||11.6|
- Huntsman Corp.: Huntsman is a manufacturer of specialty chemical products, including textile chemicals, dyes, and advanced polyurethane-based formulations. On September 8, the company reported that it expects Q3 2020 adjusted EBITDA for its Polyurethanes segment to be at least 40% higher than its previous guidance had indicated. The reasons include continued strength in construction markets, improvement in automotive demand, and higher overall margins.
- LyondellBasell Industries NV: LyondellBasell is a chemical company that makes products used in the manufacturing of lightweight plastics, construction materials, automotive components, durable textiles, and bio fuels. In September, LyondellBasell announced the launch of two new projects: a joint venture polyolefin complex with China's Liaoning Bora Enterprise Group; and the MoReTec molecular recycling facility in Italy, which will break down plastic waste into molecular form to help make new plastics materials.
- Steel Dynamics Inc.: Steel Dynamics is a diversified carbon-steel producer as well as a metals recycling company. The company has operations in steel, metals recycling and ferrous resources operations, and steel fabrication. Steel Dynamics produces flat rolled steel sheet, structural beams, and related products.
Fastest Growing Materials Stocks
These are the materials stocks with the highest year-over-year (YOY) earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.
|Fastest Growing Materials Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)|
|Eagle Materials Inc. (EXP)||81.89||3.4||145.7|
|Royal Gold Inc. (RGLD)||118.08||7.7||87.5|
|MDU Resources Group Inc. (MDU)||22.18||4.4||61.3|
- Eagle Materials Inc.: Eagle Materials is a maker and distributor of cement, concrete, gypsum wallboard, recycled paperboard, and related products. The company's products are utilized in construction projects in the commercial, residential, and industrial markets, as well as in governmental buildings. For Q1 FY 2021, ended June 30, Eagle Materials reported a 15% increase in revenue to a record $428.0 million, as well as record earnings per diluted share. CEO Michael Haack attributed the records in part to the integration of its Kosmos Cement Business, healthy demand for wallboard, and low costs.
- Royal Gold Inc.: Royal Gold is a precious metals stream and royalty company. The company acquires and manages precious metal streams, royalties, and similar interests. Royal Gold has a particular focus on gold mining operations.
- MDU Resources Group Inc.: MDU Resources provides distribution of natural gas, electricity, and construction materials. The company also offers construction services to customers in the U.S.
Materials Stocks with the Most Momentum
These are the materials stocks that had the highest total return over the last 12 months.
|Materials Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Newmont Corp. (NEM)||61.42||49.3||57.5|
|Freeport-McMoRan Inc. (FCX)||15.30||22.2||53.3|
The Scotts Miracle-Gro Co. (SMG)
|Materials Select Sector SPDR ETF (XLB)||N/A||N/A||10.1|
- Newmont Corp.: Newmont acquires and develops mineral properties. The company produces primarily gold, but also silver, copper, zinc, and lead. On September 20, Newmont entered into a definitive agreement with Maverix Metals Inc. (MMX) under which Newmont will sell a portfolio of 11 royalties to Maverix. As part of the agreement, Newmont also will acquire Maverix shares with a value of roughly $79.1 million. Through the deal, Newmont will own about 30% of Maverix outstanding common shares, which the company said it is buying for "investment purposes."
- Freeport-McMoRan Inc.: Freeport-McMoRan is a leading international mining company with significant reserves of copper, gold, molybdenum, cobalt, oil, and gas.
- The Scotts Miracle-Gro Co.: The Scotts Miracle-Gro Co. makes lawn and garden products as well as products used in professional horticulture. These products include fertilizers, plant foods, gardening soils, grass seed, pest controls, and related offerings. The company provides lawn service in the U.S. and product sales in North America and Europe. On September 14, the company updated its outlook for FY 2020, which ended in September. The company said it expected net sales and non-GAAP adjusted EPS to exceed its prior guidance, including company-wide sales growth of over 30%.
YCharts. "YCharts." Accessed Sept. 29, 2020.
Huntsman Corp. "Huntsman Updates Its Third Quarter 2020 Outlook." Accessed Sept. 29, 2020.
LyondellBasell Industries NV. "LyondellBasell Successfully Starts Up New Pilot Molecular Recycling Facility." Accessed Sept. 29, 2020.
LyondellBasell Industries NV. "LyondellBasell and Bora Start-up New Joint Venture Facility." Accessed Sept. 29, 2020.
Eagle Materials Inc. "Eagle Materials Reports Record First Quarter Results." Accessed Sept. 29, 2020.
Newmont Corp. "Newmont Files Early Warning Report." Accessed Sept. 29, 2020.
The Scotts Miracle-Gro Co. "ScottsMiracle-Gro Updates Outlook for Fiscal 2020; Net Sales, Non-GAAP Adjusted Earnings Expected to Exceed Prior Guidance." Accessed Sept. 29, 2020.