Steel stocks have reached new highs in recent weeks. We recently covered the sector as well as an exchange-traded fund (ETF). Today we extend that discussion to member EVRAZ (LON 🙂 (OTC :).
In the past year, EVRE shares have returned more than 158% and year-to-date the share is up about 44%. On May 20, the stock closed at 668p (or $ 9.42 for US stocks).
The current stock price supports a 7.4% dividend yield, a percentage well above the long-term average for approximately 4.5% dividend yields for other FTSE 100 members. That's why dividend investors are piling on EVRE shares. The stock will go ex-dividend on May 25, with the next dividend payment expected on June 25. Evraz's current market capitalization is ÂŁ 9.8 billion (US $ 13.9 billion).
By comparison, the index has risen 124% over the past 12 months. To date, it is up 68%, reaching a multi-year high in recent days. Since most of the extracted material is used in steel production, iron ore prices are also an important part of the equation.
According to the World Steel Association, global steel demand will increase by more than 4% by 2021. China is both the largest producer and the largest consumer of steel. This soaring demand for iron and steel has neglected steel stocks worldwide.
Given the recent rise in EVRE stock prices, investors are now wondering if more gains can be made in the coming months. Let's see.
Recent Earnings
Evraz is a steel, mining and vanadium company with operations in Russia, Kazakhstan, USA, Canada and the Czech Republic. Its competitive advantage lies in the fact that it is involved in every step of the steel making process. It owns iron ore mines as well as steel foundries. Some readers may also know that Russian businessman Roman Abramovich is the company's largest shareholder.
At the end of February, Evraz was released full year. The group's consolidated revenues for the year ended December 31, 2020 totaled $ 9.75 billion, down 18.1% year-on-year. Last year it had been $ 11.9 billion. Net income of $ 858 million translated into base earnings per share of 58 cents. A year ago, the comparable figures had been $ 365 million and 23 cents a share.
CEO Alexander Frolov said:
"The Group delivered solid operating and financial results with EBITDA of $ 2,212 million and an EBITDA margin of 22.7% in 2020."
On April 29, Evraz released a trade update for Q1, showing weakness in manufacturing and supply chain issues for the quarter. However, despite the cautious management update, EVRE shares rose by a further 10% in May, helped by the rise in steel prices.
Different exchanges worldwide offer different steel futures. For example, futures on the CME are up more than 215% in the last 12 months.
Bottom Line
Commodity prices have risen steadily over the past year. Analysts are debating whether there is a super cycle for commodities, which can last many years. Rising inflation expectations were one of the main drivers.
Still, asset prices such as steel can fall as quickly as they rise. When that happens, high profits from steel companies, including Evraz, don't last long. In other words, stocks can be & # 39; discounted & # 39; for a variety of reasons.
As with other investments, due diligence on EVRE shares would be necessary. A possible drop to the 630p level would improve the margin of safety for long-term investors. After such a downturn, the bullish momentum of recent months could easily continue the rest of the year. Meanwhile, long-term shareholders would be entitled to the juicy dividend.
Finally, those investors who don't want to spend capital on a single company like Evraz might consider buying an ETF that would give access to steel stocks. Examples include the VanEck Vectors Steel ETF (NYSE 🙂 and the SPDR® S&P Metals and Mining ETF (NYSE :).
