For Immediate Release
Chicago, IL – May 4, 2022 – Today, Zacks Investment Ideas feature highlights VanEck Vectors Steel ETF SLX and Tenaris S.A. TS.
Follow the Trend to the End (Where It Bends)
The bullish run for steel stocks may be just getting started.
Some investors may feel conservative about investing in a stock that is trading near a 52-week high. Rather than viewing the price level as concerning, history has shown us that a stock hitting new 52-week highs is a telling sign of strength. Only the strongest stocks that are in the most powerful uptrends print fresh yearly highs, and many steel stocks are displaying that exact behavior at this very moment.
History has also illustrated countless times that stock trends tend to last longer than most investors realize – particularly strong uptrends breaking out to new highs. The VanEck Vectors Steel ETF has not only outperformed over the course of the past year (climbing nearly 11% versus a -0.94% loss for the S&P 500), it is also showing relative strength in 2022.
The old market adage comes to mind – follow the trend until the end when it bends. There’s no sign that the uptrend in the VanEck Vectors Steel ETF is bending. SLX seeks to replicate the performance of the NYSE Arca Steel Index, which is intended to track the overall performance of the companies involved in the steel sector. This index has more than tripled in value from the March 2020 bottom. The stock we will discuss below constitutes 5.64% of the total SLX holdings.
The Zacks Steel – Pipe and Tube industry group has outpaced the market this year with a 24.9% return and is currently ranked in the top 1% out of approximately 250 industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months.
Quantitative research studies have shown that approximately half of a stock’s future price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
This highly-rated industry also contains the stock we will analyze below. Let’s take a more in-depth look at this Zacks Rank #1 (Strong Buy) stock.
Tenaris is a leading global manufacturer and supplier of steel pipe products and associated services to the oil and gas, energy, and related industries. TS produces and sells seamless and welded steel tubular products such as steel casings, mechanical and structural pipes, premium joints and couplings, and subsea pipelines. Tenaris was incorporated in 2001 and is based in Luxembourg.
Tenaris has exceeded earnings estimates in each of the past seven quarters. The steel manufacturer most recently reported Q1 EPS last week of $0.85, a 25% surprise over the $0.68 consensus estimate. TS has posted a trailing four-quarter average earnings surprise of 62.85%, helping the stock advance nearly 45% in the past year.
Despite the impressive performance, TS trades at a relatively undervalued 9.35 forward P/E compared to its industry group (16.23). Analysts have increased their full-year earnings estimates by 14.13% in the past 60 days. The 2022 Zacks Consensus EPS Estimate now stands at $3.23, reflecting potential growth of 72.73% relative to last year.
Keep an eye on TS as well as its industry group as the outperformance looks set to continue.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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VanEck Steel ETF (SLX): ETF Research Reports
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