Shares of this lesser-known steel company provide solid value for investors at current trading levels. Commercial Metals Co. (NYSE: CMC) manufactures, recycles and markets steel and metal products and related materials and services in the United States and internationally.
As one of the leading suppliers to the nonresidential construction sector, Commercial Metals has revived as that area of the market has picked up. The U.S. Architecture Billings Index, an economic indicator that provides a growth forecast of nonresidential construction spending activity nine to 12 months out, has shown very consistent growth, and that bodes well for the company.
Shareholders receive a 2.94% dividend. The $21 Jefferies price target compares with the $19.89 consensus target. The stock closed most recently at $16.20.
This top steel company should continue to do very well if the economy sees continued strength this year and nonresidential construction grows. Nucor Corp. (NYSE: NUE) is one of North America’s largest steel producers, with almost 27 million tons of finished steel capacity at 23 mini-mills throughout the United States. The company’s downstream steel products business includes rebar fabrication, steel joists/deck, cold finished bars, fasteners, building systems and wire mesh. Nucor also has 5 million tons of scrap processing capacity.
Nucor has always kept a very conservative balance sheet and is poised for slow but steady growth next year and beyond, especially if a huge infrastructure build-out becomes a reality. In addition, global weather catastrophes have also helped continue to drive the need for steel products.
Nucor investors receive a solid 3.13% dividend. Jefferies has a price target of $63. The consensus price target is slightly lower at $61, and the stock closed most recently at $49.34.
This is another steel company on which Jefferies remains very positive. Steel Dynamics Inc. (NASDAQ: STLD) operates six steel mini-mills in Indiana, Virginia, Mississippi and West Virginia. Production capacity has been nearly 10 million tons, of a total 110 million U.S. capacity.
The company makes flat-rolled products, special/merchant bars and structural steel products. Steel Dynamics can process about 7 million tons of ferrous scrap and has a downstream operation that processes finished steel.
The dividend yield for investors is 3.17%. Jefferies has set a $35 price target. The consensus target is right in line at $34.82, and the stock closed at $27.38 per share.
Investors should remember that while initially there was some downside pressure on pricing, the removal of tariffs is critical for U.S. exports, especially to Mexico, and the long-term outlook should improve dramatically. Plus, the approval of the new Mexico/Canada trade deal to replace NAFTA would be an overall strong positive as well.
Lastly, all these stocks are trading near 52-week lows, and the companies pay dependable dividends. The risk/reward metrics for the sector look solid for investors with long-term investment horizons.
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