The stock market has been highly volatile since the beginning of the year due to worries over decade-high inflation, the Fed’s hawkish tilt, growing sanctions on Russia, and deepening supply chain disruptions. All major U.S. indexes were pushed into correction territory in the first quarter of 2022.
Furthermore, recently surging U.S. Treasury yields amid anticipation of aggressive rate hikes to curb inflation, and a resurgence of COVID-19 cases in China are adding to investor concerns. But despite the volatile market, several fundamentally good stocks have been gaining momentum lately as investors bet on stocks with solid financials and growth prospects.
Given these factors, we think momentum stocks Steel Dynamics, Inc. (STLD), Arch Resources, Inc. (ARCH), and Nexa Resources S.A. (NEXA) could be good additions to one’s portfolio. These stocks have an overall Buy rating in our proprietary POWR Ratings system.
Steel Dynamics, Inc. (STLD)
STLD operates as a steel producer and metal recycler in the United States. The Fort Wayne, Ind., company operates through three segments: Steel Operations; Metals Recycling Operations; and Steel Fabrication Operations. It also offers transportation logistics, marketing, and brokerage services. STLD’s products are used in construction, manufacturing, automotive, transportation, agriculture equipment, and pipe and tube industries.
On February 28, STLD declared a first-quarter cash dividend of $0.34 per common share, representing a 31% increase over the company’s 2021 quarterly rate. In addition, its board of directors authorized an additional share repurchase program of up to $1.25 billion. These moves reflect the company’s strong capital foundation and consistent cash generation.
On January 31, STLD completed the acquisition of a minority equity interest in New Process Steel, L.P., a metals solution and distribution supply-chain management company. “This minority equity interest enables us to expand our exposure to value-added manufacturing opportunities, while continuing to serve our other long-standing flat roll steel customer needs,” said Mark D. Millett, chairman and CEO of STLD.
In its fiscal 2021 fourth quarter, ended Dec. 31, 2021, STLD's net sales increased 104.2% year-over-year to $5.31 billion, while gross profit rose 298.4% year-over-year to $1.76 billion. Its operating income improved 452.3% from the prior-year period to $1.43 billion. STLD’s net income rose 456.3% year-over-year to $1.19 billion. And its earnings per share attributable to STLD stockholders grew 516.9% year-over-year to $5.49.
The $5.35 billion consensus revenue for its fiscal year 2022 first quarter, ended March 31, 2022, represents 51% growth from the same period in 2021. The $5.69 consensus EPS estimate for the to-be-reported quarter indicates a 170.9% year-over-year rise. It is no surprise that STLD has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock gained 40.7% in price year-to-date and 71.9% over the past year and closed yesterday's trading session at $87.34. STLD is currently trading above its 50-day and 200-day moving averages of $73.96 and $65.46, respectively, indicating an uptrend.
STLD's POWR Ratings reflect this promising outlook. The stock has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
STLD has an A grade for Momentum, and B for Growth and Quality. Within the A-rated Steel industry, it is ranked #17 of 34 stocks.
To see additional POWR Ratings (Stability, Value, and Sentiment) for STLD, click here.
Arch Resources, Inc. (ARCH)
ARCH produces and sells thermal and metallurgical coal from surface and underground mines. The St. Louis, Miss., .company sells its products to industrial, steel, and utility producers in the U.S., Europe, Asia, Central, and South America, and Africa. ARCH operates seven active mines. It owns 28,292 acres of coal land in Ohio, 10,095 acres in Virginia, 234,543 acres in Illinois, 33,047 acres of coal land in Kentucky, with holdings in several other locations.
ARCH's revenues increased 123.4% year-over-year to $805.70 million in its fiscal 2021 fourth quarter, ended Dec.31, 2021. ARCH’s income from operations grew 425.9% year-over-year to $238.87 million. Its adjusted EBITDA rose 7,263.6% year-over-year to $304.41 million, and ARCH’s net income and net income per common share came in at $226.61 million and $11.92, respectively, registering a 388.6% and 330.6% increase from the prior-year period.
Analysts expect ARCH's revenue for its fiscal year 2022 first quarter, ended March 31, 2022, to be $707.70 million, representing a 97.9% rise year-over-year. The Street expects the company's EPS for the to-be-reported quarter to be $13.38, representing a 3,445% increase year-over-year.
The stock has improved 77.7% in price year-to-date and 63.3% over the past three months. It closed yesterday's trading session at $162.23. It is currently trading above its 50-day and 200-day moving averages of $132.52 and $94.33, respectively, indicating an uptrend.
ARCH’s POWR Ratings reflect a strong outlook. The stock has an overall B rating, which translates to Buy in our POWR Ratings system.
ARCH has an A grade for Momentum and B for Growth, Value, and Quality. It is ranked #7 of 11 stocks in the A-rated Coal industry.
Click here to see ARCH’s POWR Ratings for Stability and Sentiment.
Nexa Resources S.A. (NEXA)
Headquartered in Luxembourg, Luxembourg, NEXA is in the zinc mining and smelting business. The company produces zinc, silver, gold, lead, copper cement, sulfuric acid, sulfur dioxide, and limestone deposits. NEXA owns and operates underground polymetallic mines, including three in the Central Andes of Peru and two in the State of Minas Gerais in Brazil.
This month, NEXA announced that its Vazante Operation is now working at full capacity following an underground mine dewatering. Vazante’s current throughput is 4.6-kilotons per day. The company affirmed the Vazante mine’s zinc production guidance at 118-127kt for 2022.
Last month, NEXA resumed operations after a temporary suspension in its Atacocha San Gerardo open pit mine in Peru. For this year, the mine is expected to produce zinc in the range of 8.5-9.4kt, an estimated increase of 3% from 2021.
In its fiscal 2021 fourth quarter, ended Dec. 31, 2021, NEXA's net revenue increased 6.8% year-over-year to $677.90 million. The company’s financial income improved 112.6% year-over-year to $4.04 million. Its net cash provided by operating activities amounted to $120.70 million for the fourth quarter.
The $679.36 million consensus revenue estimate for its fiscal year 2022 first quarter, ended March 31, 2022, represents 12.7% growth from the same period in 2021. The $0.18 consensus EPS estimate for the to-be-reported quarter indicates a 5.9% year-over-year rise.
Shares of NEXA have increased 31.4% in price year-to-date and 16.1% over the past three months. They closed yesterday's trading session at $10.33. NEXA is currently trading above its 50-day and 200-day moving averages of $9.00 and $8.50, respectively, indicating an uptrend.
NEXA's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B grade, which equates to Buy in our proprietary rating system.
NEXA has an A grade for Momentum. Within the Miners - Diversified industry, it is ranked #8 of 48 stocks.
To see additional POWR Ratings (Growth, Value, Quality, Stability, and Sentiment) for NEXA, click here.
Note that NEXA is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.
STLD shares were trading at $87.50 per share on Thursday afternoon, up $0.16 (+0.18%). Year-to-date, STLD has gained 41.54%, versus a -6.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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