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3 Basic Materials Stocks to Buy Before Earnings This Week

Many stocks in the Basic Materials sector outperformed the broader market over the last year and provided a much-needed hedge against inflation.

Let’s take a look at three highly ranked Basic Material stocks set to report earnings this week that investors may want to consider buying in 2023 as well.

Freeport McMoRan FCX

Starting the list is mineral exploration and development miner Freeport McMoRan (FCX).

Freeport is set to report fourth-quarter earnings on January 25, with its stock currently sporting a Zacks Rank #2 (Buy).

Freeport McMoRan conducts its operations primarily through its principal subsidiaries’ PT Freeport Indonesia, Freeport-McMoRan Corporation, and Atlantic Copper. It is important to note that PT Freeport Indonesia’s principal asset Papua, is an Indonesia-based mine that contains the world’s largest copper and gold reserves.

Londond Metal Exchange
Londond Metal Exchange


Image Source: Londond Metal Exchange

With copper prices hitting their highest levels in the last six months on the London Metal Exchange as shown in the above chart, Freeport McMoRan stock is sticking out with earnings estimate revisions trending higher for fiscal 2023 as the company rounds out FY22 with its Q4 report.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Q4 Preview:  The rise in copper prices, primarily attributed to the reopening of China, which is the world’s largest copper consumer, is great timing as Freeport McMoRan earnings are expected to have dipped year over year during Q4 after a tough prior-year quarter to follow.

Fourth-quarter earnings are expected to dip -58% to $0.40 a share compared to $0.96 a share in Q4 2021. On the top line, sales are projected at $5.34 billion, a -13% decrease from the prior year quarter. Still, an earnings beat on the company’s bottom line is not completely out of the picture.

Earnings ESP:  The Zacks Expected Surprise Prediction is a useful tool in indicating which stocks could top quarterly earnings estimates by comparing the Zacks Consensus to the Most Accurate Consensus.

With the Zacks Consensus Estimate for Freeport McMoRan’s Q4 earnings at $0.40 a share and the Most Accurate Estimate at $0.42 per share, FCX is expected to beat expectations by 6.96%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Takeaway:  Certainly, a strong earnings beat on Freeport McMoRan’s bottom line could lead to more upside in the stock. This could be supported by the company potentially offering better-than-expected guidance in correlation with higher copper prices.

Nucor Corporation NUE

Steel Producer and metal recycler Nucor Corporation (NUE) is another stock investors may want to consider buying ahead of its Q4 earnings on January 26. Nucor stock sports a Zack Rank #1 (Strong Buy) with earnings estimate revisions notably rising for fiscal 2023.

Even better, Nucor stock has been one of the top performers out of the basic materials sector over the last year to largely outperform the S&P 500 and is already up 15% to start 2023.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Q4 Preview:  Following an excellent prior-year quarter, earnings are forecasted at $4.18 per share for Nucor’s fourth quarter compared to $7.97 a share in Q4 2021. Sales for Q4 are expected at $7.91 billion which would be a -23% YoY decline.

However, with iron and steel prices remaining higher despite cooling off recently, it is quite possible that Nucor will beat earnings expectations for a fifth consecutive quarter.

U.S. Bureau of Labor Statistics
U.S. Bureau of Labor Statistics


Image Source: U.S. Bureau of Labor Statistics

Earnings ESP:  Nucor stock has an ESP of 3.29% as the Zacks Consensus for Q4 earnings is $4.18 a share and the Most Accurate Estimate is $4.32 per share indicating the company could beat on its bottom line.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Takeaway: Despite the year-over-year quarterly drop in earnings, Nucor stock trades at just 11.8X forward earnings which is well below its decade high of 41.4X and a 23% discount to the median of 15.3X.

Nucor’s valuation appears to already support the likelihood that the company’s earnings could decrease as steel prices move lower which still makes the stock attractive at its current levels with earnings estimates going up.

Steel Dynamics STLD

Rounding out the list is Steel Dynamics (STLD) which is set to report its Q4 earnings on January 25. Also sporting a Zacks Rank #1 (Strong Buy), Steel Dynamics FY23 earnings estimates have gone up 36% over the last 60 days to $10.82 per share compared to estimates of $7.94 a share two months ago.

Steel Dynamics is also a leading steel producer and recycler of metal in the United States and one of the most diversified steel companies in the U.S. with a vast range of specialty products.

The performance of Steel Dynamics stock has been incredible over the last year, up +106%, standing out among stocks across any sector.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Q4 Preview:  Like Nucor, Steel Dynamics follows a stellar prior year fourth quarter. Steel Dynamics Q4 earnings are anticipated at $3.60 per share compared to $5.98 a share in Q4 2021. Sales for Q4 are expected to be $4.73 billion and down -11% YoY.

Still, it is quite plausible that Nucor will beat earnings expectations for what would be a 13th consecutive quarter dating back to January of 2020.

Earnings ESP: The Zacks ESP for Steel Dynamics indicates the company could once again beat on its bottom line. With the Zacks Consensus for Nucor’s Q4 earnings at $3.60 a share the most accurate estimate of $3.77 per share indicates the possibility of a 4.82% earnings beat.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Takeaway: The top and bottom line growth for Steel Dynamics has been massive over the last few years as steel prices soared, and it is noteworthy that the company has also beaten sales expectations for 12 consecutive quarters.

Steel Dynamics also trades attractively relative to its past at just 9.9X forward earnings which is nicely below its decade high of 24.2X and the median of 12.2X.

With its valuation also supporting the potential drop in steel prices, Steel Dynamics stock could have more upside especially if the company continues its stellar track record of topping quarterly expectations.

Bottom Line

After the very impressive top and bottom line growth these basic material stocks had in recent years, investors will definitely want to pay attention to their Q4 earnings. The rising earnings estimate revisions make the possibility of beating Q4 expectations quite plausible for Freeport McMoRan, Nucor, and Steel Dynamic stock and could continue supporting their strong performances.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

FreeportMcMoRan Inc. (FCX) : Free Stock Analysis Report

Nucor Corporation (NUE) : Free Stock Analysis Report

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Zacks Investment Research