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The Zacks Metal Products - Procurement and Fabrication industry has been witnessing a deceleration in orders of late due to subdued customer spending. The companies in the industry have been managing production levels in the wake of weak demand. Elevated input costs also continue to act as a headwind.
Amid these conditions, industry players like ESAB Corporation ESAB, TriMas Corporation TRS, Northwest Pipe Company NWPX and GrafTech International EAF are poised to benefit from their proactive cost-management actions and efforts to improve efficiency. Additionally, their continuous investments in automation and innovation are anticipated to contribute to their growth.
About the Industry
The Zacks Metal Products - Procurement and Fabrication industry primarily comprises metal processing and fabrication service providers that transform metals into metal parts, machinery or components used across various other industries. Their processes include forging, stamping, bending, forming and machining, which are used in shaping individual pieces of metal, and welding and assembling to join parts. The companies either use one of these processes or a combination of all. The most common raw materials utilized by metal fabrication companies include plate metal, formed or expanded metal, tube stock, welding wire or rod and casting. The industry players serve an array of markets, including construction, mining, aerospace and defense, automotive, agriculture, oil and gas, electronics/electrical components, industrial equipment, and general consumer.
Trends Shaping the Future of the Metal Products - Procurement and Fabrication Industry
Prolonged Weakness in Manufacturing Activities is Concerning: The Institute for Supply Management’s Manufacturing Index has languished in the contraction territory for 16 consecutive months till February 2024. March saw a slight uptick to 50.3%, but the index slipped to the contraction territory again with a 49.2% reading in April. It has decelerated since and was 46.8% in July. The average for the 12 months ended July 2024 is 48.1%. The New Orders Index has also contracted for the fourth consecutive month in July. The Index has not delivered consistent growth since the end of its 24-month expansion streak in May 2022. Companies continue to manage outputs cautiously amid ongoing weakness in orders. The industry has also been affected by supply-chain issues. Deliveries of suppliers to manufacturing organizations were slower in July for the second consecutive month. Once the situation normalizes, demand in the metal Products - Procurement and Fabrication industry’s diverse end markets will drive growth.
Pricing Actions to Combat High Costs: The industry has been experiencing significant inflation levels, including higher prices for labor, freight and fuel. The companies are witnessing labor shortages for some positions and incurring steep labor costs to meet demand. The industry players are focusing on pricing actions, cost-cutting measures, efforts to improve productivity and efficiency, and the diversification of supplier bases to mitigate some of these headwinds.
High Costs & Supply-Chain Woes Persist: The industry has been experiencing significant inflation levels, including higher prices for labor, freight and fuel. The companies are witnessing labor shortages for some positions and incurring steep labor costs to meet demand. The industry players are focusing on pricing actions, cost-cutting measures, efforts to improve productivity and efficiency, and the diversification of the supplier bases to mitigate some headwinds.
Automation & End-Market Growth to Act as Catalysts: The industry’s customer-focused approach to providing cost-effective technical solutions, automation to increase efficiency and lower labor costs, and the development of innovative products will drive growth in the days ahead. Improvements in end-use sectors, such as manufacturing, aerospace and automotive, are anticipated to benefit the metal fabrication market over the next few years. Developing countries hold promise due to rapid industrialization. This, in turn, is likely to create demand.
Zacks Industry Rank Indicates Dim Prospects
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates tepid prospects in the near term. The Zacks Metal Products - Procurement and Fabrication industry, which is a 10-stock group within the broader Industrial Products sector, currently carries a Zacks Industry Rank #209, which places it in the bottom 17% of the 252 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. The industry's earnings estimates for the year have moved down 11% from that mentioned at the beginning of 2024.
Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and the valuation picture.
Industry Vs. Broader Market
The Zacks Metal Products - Procurement and Fabrication industry has outperformed its sector and Zacks S&P 500 composite over the past year.
Over this period, the industry has gained 28.2% compared with the sector’s growth of 13.5% and the Zacks S&P 500 composite’s rise of 23.6%.
Industry's Current Valuation
Based on the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing the Metal Products - Procurement and Fabrication companies, the industry is currently trading at 19.77 compared with the S&P 500’s 14.69 and the Industrial Products sector’s forward 12-month EV/EBITDA of 19.67. This is shown in the charts below.
Over the last five years, the industry traded as high as 24.60 and as low as 4.55, with the median at 10.51.
4 Metal Products - Procurement and Fabrication Stocks to Keep Tabs on
Northwest Pipe: The company delivered record gross profit and revenues in the Steel Pressure Pipe business were also robust in the second quarter of 2024. The segment benefitted from the strong pipeline of bidding opportunities, which is expected to remain strong for the rest of 2024. NWPX has been implementing cost reductions and improving operating efficiency, which will support margins. Rising demand for developed water sources and the pressing need to upgrade, repair and replace the aging U.S water and wastewater systems present significant opportunities. The company continues to strengthen its liquidity by repaying debt and generating strong cash flow from operations, supported by effective management of working capital. Its growth strategy remains focused on improving the Precast business to reduce the cyclicality of the Steel Pressure Pipe operations, and increasing overall margins and cash flow. The company also continues to look for growth opportunities through expansions or acquisitions. The stock has gained 16% in a month.
The Zacks Consensus Estimate for Vancouver, WA-based Northwest Pipe’s current-year earnings has moved up 20% over the past 60 days. The estimate indicates growth of 41.6% from the year-earlier reported number. NWPX has a trailing four-quarter earnings surprise of 20.2%, on average, and currently flaunts a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
ESAB: The company entered a distribution agreement with INFRA Group in June 2024 to expand the availability of ESAB’s differentiated solutions by offering its welding and gas-control equipment to customers in Mexico. ESAB recently acquired Linde Industries Private Limited, which is a market leader in welding consumables and equipment in Bangladesh. Earlier this year, ESAB completed the acquisition of Sager S.A. and announced an agreement to acquire SUMIG. These acquisitions are faster-growing, less cyclical and higher-margin businesses that will expand its light automation, equipment, and repair and maintenance portfolio in the Americas. The company recently reported a record margin and cash flow in the second quarter of 2024. ESAB shares have gained 1.6% in the past month. ESAB has been simplifying its product lines and introducing innovative products, fueling growth and profitability. It continues to drive innovation, growth, margin expansion and higher cash flow using its ESAB Business Excellence system. The company expects continued improvements in its adjusted EBITDA and earnings per share in 2024.
The Zacks Consensus Estimate for North Bethesda, MD-based ESAB’s current-year earnings indicates year-over-year growth of 8.5%. The company has a trailing four-quarter earnings surprise of 9.8%. ESAB currently has a long-term estimated earnings growth of 11.9%. It currently carries a Zacks Rank #3 (Hold).
GrafTech International: The demand for graphite electrodes will remain weak in the near term, reflecting the ongoing challenges in the steel industry. However, as the industry adopts the electric arc furnace method of steelmaking in line with its decarbonization efforts, the demand for graphite electrodes will surge, which bodes well for EAF. In the first quarter of 2024, the company started various initiatives to lower its cost structure and optimize its manufacturing footprint. These efforts have already led to a sequential improvement in EBITDA and earnings in the second quarter of 2024. EAF expects the actions to result in annualized cost savings of around $25 million. Investments in customer engagement and enhancing customer value proposition led to a sequential increase in sales volumes. EAF expects sales volumes to see modest year-over-year improvement in 2024. EAF’s strategic investments in operations to capitalize on demand growth for battery materials for the EV market will also aid growth. EAF shares have gained 17.3% in the past month.
The Zacks Consensus Estimate for Brooklyn Heights, OH-based GrafTech International’s earnings for fiscal 2024 has been unchanged over the past 60 days. The company has a trailing four-quarter earnings surprise of 2.61%, on average. EAF currently carries a Zacks Rank #3.
TriMas: The company’s packaging segment has rebounded from its six-quarter stint of negative organic growth and is benefitting from the gradual recovery in the consumer goods and industrial markets, and improving order intake. The Aerospace segment is poised for growth on solid backlog, order intake and operational excellence initiatives. TriMas has a strong pipeline of products and process innovation, which will sustain long-term growth. Its strategy is to accelerate growth through acquisitions, particularly in its Packaging and Aerospace platforms, backed by long-term growth and performance profiles. The company has been focusing on leveraging the TriMas Business Model, which was implemented in late 2016 to improve the performance of its businesses. TRS shares have gained 3.1% in a month.
The Zacks Consensus Estimate for Bloomfield Hills, MI-based TriMas’ fiscal 2024 earnings indicates year-over-year growth of 1.72%. The company currently carries a Zacks Rank #3.
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
ESAB Corporation (ESAB) : Free Stock Analysis Report
Northwest Pipe Company (NWPX) : Free Stock Analysis Report
TriMas Corporation (TRS) : Free Stock Analysis Report
GrafTech International Ltd. (EAF) : Free Stock Analysis Report
By David Lawder
WASHINGTON (Reuters) -The U.S. has requested trade dispute settlement consultations with Canada over its new digital services tax, the Biden administration said on Friday, adding that the "discriminatory" tax appears inconsistent with Canada's North American trade deal obligations.
The U.S. Trade Representative's office said in a statement that it will work with Canada to resolve U.S. concerns over the new tax enacted in June, through the consultations. But if an agreement cannot be reached after 75 days, it may request a dispute settlement panel under the U.S.-Mexico-Canada Agreement on trade (USMCA).
The request for consultations is the first step in the USMCA's dispute resolution process, which ultimately could lead to the imposition of retaliatory U.S. tariffs on imports from Canada.
In Ottawa, a Canadian government official said the U.S. move was not concerning or a surprise. The official, who requested anonymity given the sensitivity of the topic, said the challenge was part of a conversation between the two nations.
The U.S. government has repeatedly objected to the planned Canadian tax. The offices of Canadian Finance Minister Chrystia Freeland and Trade Minister Mary Ng were not immediately available for comment.
USTR had previously readied retaliatory duties against seven other countries that had imposed digital services taxes (DSTs) - Austria, Britain, France, India, Italy, Spain and Turkey - but these have been suspended as global negotiations continue over the reallocation of taxing rights on large, multinational companies. This shift was meant to replace DSTs, but those talks have stalled over technical details.
USTR has found unilateral digital services taxes, largely aimed at collecting revenues from U.S. technology giants such as Alphabet's Google, Apple, Amazon.com and Meta, to discriminate against U.S. companies.
"The United States opposes unilateral digital service taxes that discriminate against U.S. companies. USTR is taking action today to address Canada's discriminatory policies,” U.S. Trade Representative Katherine Tai said in a statement.
"As we pursue these consultations, we will continue to support the Department of the Treasury in the OECD/G20 global tax negotiations to bring a comprehensive solution to the challenge of DSTs," Tai said.
(Additional reporting by David Ljunggren in Ottawa; Editing by Andrea Ricci and Diane Craft)
Investing.com – Russia stocks were lower after the close on Friday, as losses in the Telecoms, Power and Mining sectors led shares lower.
At the close in Moscow, the MOEX Russia lost 2.15% to hit a new 52-week low.
The best performers of the session on the MOEX Russia were X5 Retail Group NV (MCX:FIVEDR), which unchanged 0.00% or 0.00 points to trade at 2,798.00 at the close. Meanwhile, HeadHunter Group PLC (MCX:HHRUDR) unchanged 0.00% or 0.00 points to end at 3,908.00 and AFK Sistema (MCX:AFKS) was down 0.50% or 0.08 points to 16.05 in late trade.
The worst performers of the session were Globaltrans Investment Gdr (MCX:GLTRDR), which fell 15.54% or 84.45 points to trade at 459.10 at the close. Magnit (MCX:MGNT) declined 5.58% or 279.00 points to end at 4,720.00 and Gazprom PAO (MCX:GAZP) was down 5.58% or 7.27 points to 123.00.
Falling stocks outnumbered advancing ones on the Moscow Stock Exchange by 218 to 27 and 8 ended unchanged.
Shares in Globaltrans Investment Gdr (MCX:GLTRDR) fell to 52-week lows; falling 15.54% or 84.45 to 459.10. Shares in Magnit (MCX:MGNT) fell to 52-week lows; falling 5.58% or 279.00 to 4,720.00.
The Russian VIX, which measures the implied volatility of MOEX Russia options, was down 6.27% to 33.34.
Gold Futures for December delivery was down 0.95% or 24.40 to $2,535.90 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in October fell 2.98% or 2.26 to hit $73.65 a barrel, while the November Brent oil contract fell 2.25% or 1.77 to trade at $77.05 a barrel.
USD/RUB was down 1.47% to 90.65, while EUR/RUB fell 1.73% to 100.15.
The US Dollar Index Futures was up 0.39% at 101.67.
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Popular meme coin Dogecoin (CRYPTO: DOGE) has been a good or bad investment, depending on when you bought it. The cryptocurrency is remarkably up over 28,000% over its lifetime but is down more than 80% from its peak in 2021. Yet, had you bought Dogecoin a year ago, you'd be up over 60% today. In other words, Dogecoin might be the most volatile thing you could invest money in.
Given Dogecoin's huge swings, who am I to say that it can't make investors rich? However, just because something is possible doesn't mean it's likely.
Dogecoin's impressive lifetime returns can seduce risk-seeking investors, but this is an illusion you should avoid.
Here is what you need to know.
Generally speaking, the more risk you take, the more potential reward you get. After all, if life-changing investment returns were easy, everyone would do it. Theoretically, investors looking for significant returns should be comfortable taking on some risk, traveling the bumpier road in pursuit of a better destination. But Dogecoin takes this to an extreme that most people probably can't tolerate.
You can see below that Dogecoin has spent most of its existence trading between 40% and 80% below its all-time highs:
Perhaps the most brutal truth is that Dogecoin doesn't have intrinsic value. Unlike stocks, it has no underlying business or assets that might justify someone paying a higher price. Dogecoin's price depends on how much people want it versus its availability. Dogecoin could easily go forever without sniffing its former high again.
Why might Dogecoin never reach its highs again? It boils down to two problems with the cryptocurrency itself.
First, Dogecoin is a meme coin created as a lighthearted way for people to learn how cryptocurrencies work. Some merchants have adopted Dogecoin as a form of payment, but it's minimal. It would be hard for enough people to take Dogecoin seriously enough to accumulate it without more widespread adoption. Additionally, the meme coin's intense volatility makes it harder to adopt since almost all companies sell goods and services with costs denominated in fiat currency.
Second, and perhaps the more significant challenge, is Dogecoin's ever-increasing supply. Society uses the U.S. dollar to buy goods and services, but the dollar itself decreases in value as the Federal Reserve adds more dollars to the economy. In other words, it takes more dollars to buy the same goods or services. That's how inflation works.
Dogecoin miners create approximately five billion DOGE annually, and there is no supply cap. So, even if everyone adopted Dogecoin, the cryptocurrency's value would theoretically decline over time due to inflation. Dogecoin's growing supply and limited uses essentially push its price downward.
What about 2021? Pandemic stimulus money and zero percent interest rates created a bubble across riskier assets in 2021. This bubble temporarily surged demand for Dogecoin, propelling it to the prices investors are still chasing today. Investors probably shouldn't buy Dogecoin, hoping it will happen again.
Dogecoin is a fun idea but is not a wise investment beyond its novelty value. The meme coin has technically generated stellar returns, but it's like the lottery. Just because someone wins doesn't make it wise to play.
Unlike Dogecoin, Bitcoin is anti-inflationary. The supply is capped at 21 million bitcoins and grows more slowly after each Bitcoin halving. It's the most prominent cryptocurrency and is steadily gaining momentum in society. Numerous merchants accept it, and some companies hold it on their balance sheets. Institutional investors have begun launching more Bitcoin funds, too.
These differences have been reflected in Bitcoin's performance versus Dogecoin since the 2021 peak:
Investors should consider all cryptocurrencies speculative investments and hold them in diversified portfolios. However, they aren't created equally. Investors looking for cryptocurrency exposure in their portfolio should consider Bitcoin instead.
Before you buy stock in Dogecoin, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Dogecoin wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $720,542!*
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Is Dogecoin a Millionaire Maker? was originally published by The Motley Fool
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Try again.
