5 Steel Stocks to Buy on Trump’s Pipeline Actions

A once-lagging industry may yet again rise for investors

On Tuesday, President Trump issued a series of orders which eases the way for the Dakota Access and Keystone XL pipeline projects. This is part of his efforts to expand the country’s energy infrastructure as well as overturn key decisions of the Obama government which are linked to environmental concerns.

The immediate gainers from these actions would be oil producers in North Dakota and Canada who will now have a faster route for bringing crude to refiners on the U.S. Gulf Coast. Meanwhile, the President has also mandated that these pipelines and others inside the U.S. have to be constructed with U.S-made steel. This development will clearly benefit the U.S. steel sector and picking up such stocks is a smart choice at this point.

U.S. Steel to Be Used in Pipelines

According to a memorandum signed by the President on Tuesday, the Secretary of Commerce will have to prepare a plan which requires that U.S. made steel to be used in all pipelines within the U.S., whether they are new, under expansion or being retrofitted. Trump said that this plan is “going to put a lot of workers, a lot of steelworkers back to work.”

As a result of this decision, shares of several steelmakers had moved higher by mid-afternoon. At this point, United States Steel Corporation (X) was up 2.5% while Nucor Corporation (NUE) had gained around 2%.

Undertaking a revival of the U.S. sector was among Trump’s key campaign promises. This was part of his pledge to increase the number of manufacturing jobs. During his presidential campaign, Trump had said that he would take a tough stance against China, particularly in connection with its pricing and steel dumping practices.

Prospects for Steel Sector Bright

On the campaign trail, Trump had promised to increase government expenditure by a trillion dollars in order to repair the country’s roads, bridges and other public infrastructure. This plan is likely to take about 10 years and will be financed through a system of tax credits.

Such an effort would clearly provide a boost to all materials stocks, including steel. Additionally, Trump said on Monday that that he intends to reduce U.S. corporate taxes to within 15%-20%. This is a major cut considering that the current tax level is at 35%. He also reemphasized that he would work to reduce regulations by a significant extent. Actions of this nature would likely have a beneficial effect for the steel industry, driving the sector’s stocks upward.

Our Choices for Steel Stocks to Buy:

Trump’s focus on boosting U.S. manufacturing and creating jobs in this area is likely to have a beneficial effect on the sector. More importantly, steel stocks will be benefited in the short run itself from his pipeline related announcements.

Adding stocks from the sector would be a prudent option at this time. However, picking winning stocks may be difficult.

This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners.

However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.

We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.

Steel Producers Vs Sector Performance (1 Year)

AK Steel Holding Corporation (AKS) is a leading producer of flat-rolled carbon, stainless, electrical steel and tubular products.

AK Steel Holding Corporation (AKS) has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. Its earnings estimate for the current year has improved by 11% over the last 30 days.  The stock has returned 334% over the last one year, outperforming the Zacks Steel – Producers Market sector, which has gained 152.9% over the same period.

United States Steel Corporation (X) is a leading steel manufacturer in the U.S. and the fifth largest in the world.

United States Steel Corporation (X) has a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. Its earnings estimate for the current year has improved by 68.5% over the last 30 days.  The stock has returned 327.5% over the last year, outperforming the Zacks Steel – Producers Market sector, which has gained 152.9% over the same period. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nucor Corporation (NUE) is a leading producer of structural steel, steel bars, steel joists, steel deck and cold finished bars in the U.S.

Nucor Corporation (NUE) has gained 66.7% over the last one year, underperforming the Zacks Steel – Producers Market sector, which has gained 152.9% over the same period. However, it has a Zacks Rank #2 (Buy) and a VGM Score of A. The company has expected earnings growth of 75.8% for the current year.  Its earnings estimate for the current year has improved by 0.9% over the last 30 days.  This provides a good opportunity to buy the stock which remains valued below its market potential at this point.

Steel Dynamics, Inc. (STLD) along with its subsidiaries is a manufacturer and seller of steel products.

Steel Dynamics, Inc. (STLD) has gained 114.1% over the last one year, underperforming the Zacks Steel – Producers Market sector, which has gained 152.9% over the same period. However, it has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of 31.4% for the current year. Its earnings estimate for the current year has improved by 3.9% over the last 30 days. This provides a good opportunity to buy the stock which remains valued below its market potential at this point.

Schnitzer Steel Industries, Inc. (SCHN) collects, processes and recycles metals by operating one of the largest metals recycling businesses in the U.S.

Schnitzer Steel Industries, Inc. (SCHN) has gained 88.9% over the last one year, underperforming the Zacks Steel – Producers Market sector, which has gained 152.9% over the same period. However, it has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of 73.9% for the current year. Its earnings estimate for the current year has improved by 4.4% over the last 30 days. This provides a good opportunity to buy the stock which remains valued below its market potential at this point.

Zacks’ Top 10 Stocks for 2017

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AK Steel Holding Corporation (AKS): Free Stock Analysis Report

Steel Dynamics, Inc. (STLD): Free Stock Analysis Report

United States Steel Corporation (X): Free Stock Analysis Report

Nucor Corporation (NUE): Free Stock Analysis Report

Schnitzer Steel Industries, Inc. (SCHN): Free Stock Analysis Report

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