While the Delta-variant-driven resurgence of COVID-19 cases in the United States has led to declines in the major stock market indices from their record highs last month, stock market experts remain optimistic about the market’s momentum in the coming weeks. So, Mechel Pao (MTL) and SilverBow Resources (SBOW), which each possess strong fundamentals and solid growth attributes, could be wise bets this month. Let’s discuss.
Investors’ concerns over the potential for COVID-19’s Delta variant to derail the economic recovery, and the Federal Reserve's next move concerning bond tapering, have weighed heavily on markets so far this month. However, Dubravko Lakos-Bujas, a strategist at JP Morgan, is positive on the equity market’s prospects. He expects the S&P 500 to reach 4,700 by the end of this year and surpass 5,000 next year on better-than-expected earnings.
Moreover, August's smaller-than-expected rise in the consumer price index (CPI) has calmed investors’ fear surrounding inflation. This, along with the Fed’s conviction that inflation will subside, should drive the stock market's performance in the coming weeks.
Mechel Pao (MTL)
Headquartered in Moscow, MTL is engaged in the mining, steel, and power businesses in Russia, Asia, Europe, the United States, and internationally. Mining, Steel, and Power are the company’s three operational segments. In addition, it provides sea, rail, and motor transportation logistics services to third parties.
This month, MTL announced that it is preparing a design estimate and permission documents for the commencement of operations at the Sivaglinskoye iron ore deposit. By the end of 2022, the company plans to invest approximately two billion rubles in this project.
MTL’s revenue increased 40.3% year-over-year to ₽184.91 billion ($2.54 billion) in the six months ended June 30, 2021. Its operating income grew 664.6% from its year-ago value to ₽43.35 billion ($595.24 million). The company’s net income surged 211.9% from the prior-year period to ₽31.81 billion ($431.20 million).
The company’s revenue is expected to grow 28.9% year-over-year to $4.64 billion in its fiscal year 2021. The stock has gained 164.7% in price over the past year and 101.5% year-to-date.
MTL's POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MTL has also rated an A grade for Growth, Momentum, and Quality. Within the A-rated Steel industry, it is ranked #7 of 33 stocks.
To see additional POWR Ratings for Stability, Value, and Sentiment for MTL, click here.
Note that MTL 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.
SilverBow Resources Inc. (SBOW)
SBOW in Houston, Tex., is an oil and gas company that acquires and develops assets in the Eagle Ford shale located in South Texas. It had proven reserves of 1,106 billion cubic feet of natural gas equivalent as of December 31, 2020.
Last month, SBOW agreed to acquire oil and gas assets in the Eagle Ford. This acquisition might boost SBOW’s gas position in McMullen and Live Oak counties, while adding new oil positions in Atascosa, Lavaca, and Fayette counties.
During the second quarter, ended June 30, 2021, SBOW’s total revenue increased 181.2% year-over-year to $69.86 million. Its operating expenses declined 87.6% from the year-ago value to $36.32 million. The company’s operating income came in at $33.54 million, compared to a $267.07 million operating loss in the prior-year quarter.
A $7.91 consensus EPS estimate for the current year represents a 49.5% improvement year-over-year. In addition, analysts expect SBOW's revenue to increase 70.3% year-over-year to $302 million in its fiscal year 2021. The stock has gained 383.5% in price over the past year and 278.2% over the past nine months.
SBOW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Growth, Value, and Momentum. In the Energy – Oil & Gas industry, it is ranked #1 of 93 stocks.
In total, we rate SBOW on eight different levels. Beyond what we've stated above, we have also given SBOW grades for Stability, Sentiment, and Quality. Get all the SBOW ratings here.
MTL shares were trading at $4.31 per share on Wednesday morning, up $0.18 (+4.36%). Year-to-date, MTL has gained 110.24%, versus a 19.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.