We’re deep into earnings season and companies are looking ahead to what 2022 will bring. It’s not a great time for financial markets as talk of a looming crash continues to drive negative momentum. For some sectors, though, predictions still remain optimistic as companies report strong earnings. Steel stocks, for example, are rising across the board today as a market leader expands an initiative designed to boost growth. Indeed, U.S. Steel (NYSE:X) announced that it was instituting a $500-million stock buyback program. As a result, prices are up for several of its industry peers as well. Earnings week is poised to close on a high note for the sector.
What’s Happening With Steel Stocks
Yesterday evening brought the stock buyback announcement from U.S. Steel. X stock was quick to react well to it this morning. It shot up almost instantly, and despite a slight downtick, it soon rebounded and is still rising. As of this writing, it is up more than 5%. U.S. Steel’s larger cap competitor Nucor Corporation (NYSE:NUE) has also enjoyed a good morning, with shares rising almost 3% so far. Adding to the mix is fellow steel producer Cleveland-Cliffs (NYSE:CLF) with gains of 0.86% this morning, following a spike within the past hour.
Despite a slow start to the day, Steel Dynamics (NASDAQ:STLD) is also back in the green, up 1% after slipping this morning. Both U.S. Steel and Nucor reported positive earnings for the final quarter of 2021.
Why It Matters
It’s easy to see why 2021 was a good year for steel stocks. Steel prices reached record highs and demand continued to grow, allowing American steel producers to forge ahead confidently as the economy recovered. This year, the looming Russia-Ukraine conflict poses a potential threat to steel prices, but as of now, there’s no immediate cause for concern.
U.S. Steel CEO David Burritt is confident about his company’s future. As he stated on the recent Q4 earnings call, “We are a fundamentally different company from a year ago and expect 2022 to be another strong year.”
The metal price surge that boosted steel stock prices proved to be a defining market trend of 2021. It certainly makes sense that the company would institute a buyback program after reporting high earnings and topping revenue estimates. U.S. Steel is no stranger to this type of program. It instituted a $300 million repurchase three months ago and has already bought back $150 million, according to Bloomberg.
InvestorPlace contributor Jaimini Desai recently noted that NUE is thriving in the current inflationary environment. If one company is, its peers are likely to follow suit, if not always to the same degree. Nucor Chief Executive Officer Leon Topalian has also described steel demand as “very robust.” All major indicators point toward a positive year for the industry and for steel stocks.
What It Means
The steel industry was dealt a disappointing blow when President Joe Biden’s Build Back Better bill was stalled in the final quarter of 2021. The passing of the infrastructure spending package would have led to demand for building materials growing and metal prices spiking even more.
However, steel stocks have proven that they can do just fine without it. While investors should certainly be keeping an eye on the Russia-Ukraine conflict, there’s plenty to indicate that steel stocks will stay elevated amid strong prices and robust demand.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
