The Biden administration issued guidance to federal agencies requiring materials purchased for projects funded by the infrastructure bill must be produced in the U.S. Companies undertaking projects utilizing for example steel and iron products must ensure that it has been sourced and produced in the U.S.
The Federal government is spending $350 billion on construction this year, and it is currently not clear how many of those dollars are going to companies producing materials in the U.S.
With such a promising setting, the following three companies could potentially benefit from the Biden infrastructure bill.
Cleveland-Cliffs (NYSE: CLF)
Wall Street expects Cleveland-Cliffs to release its earnings on April 22, 2022, which could move the stock upwards. The expected earnings per share should be $1.51 which would represent a year-over-year change of 331.4%. Revenue expectations, on the other hand, are approximately $5.53 billion, representing a 36.5% potential increase.
These numbers are pretty high which points to the nature raw materials are currently in with the war in Ukraine dictating commodity prices and inflation shooting higher.
In the market, the stock has been performing quite well over the last 6 months up over 46% and while lately it is moving slightly below its 20-day Simple Moving Average.
Analysts give the stock a moderate buy rating, seeing the next 12-months average price at $34.20 or 11.18% higher than the current trading price of $30.76. If commodity prices keep going higher the more bullish price of $46 could be in play.
Nucor (NYSE: NUE)
Nucor is the largest steel producer in the U.S. and with Ukraine and Russia out of the picture for the moment its position seems more entrenched than ever. Revenue growth of 10.04% and expected higher earnings might make Nucor a winning stock for 2022.
Shares have been rising steadily from their low point in February spurred on by rising demand, inflation, and sidelining of Russia and Ukraine as steel producers. The stock is far above the daily SMAs and could be forming an upward momentum.
Analysts have a hold rating on the stock, but the way the stock and the company have been performing re-ratings could be expected. Currently, the price stands at $170.33 after the huge momentous upswing in February which is far above the most bullish price analysts predicted for the stock, which could support the re-rating thesis.
Steel Dynamics (NASDAQ: STLD)
Steel Dynamics is one of the rare companies that has a solid balance sheet, free cash flow, and has delivered reliable long-term dividends and capital gains. Global energy prices have exploded benefiting U.S.-based steel producers.
The company delivered $18.4 billion in revenue or $3.2 billion in net income which are records for the company. This wave of cash can be used for buybacks and dividends which both will bring value to investors.
The stock has had an amazing performance since February creating an upward momentum shooting past all SMAa. Volumes were steadily increasing as the pop of the stock occurred.
Analysts give the stock a moderate buy with the average next 12-months price already covered by the current trading price of $90.51. The more bullish analysts predicted the price to reach $117 which currently seems reachable.
Steel stocks are in a very interesting situation with economic growth in the U.S. slowing but steel prices remaining at all-time highs. U.S. auto inventories are on the lower side and EU producers cannot push new ones due to higher production costs so steel producers at home will benefit even more.
Biden’s infrastructure bill is another catalyst for the stocks, which is the reason why they performed well, with possibly more room to grow. Investors looking to profit from rising steel prices should keep these three stocks on their watchlists.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.