Rising global electric vehicle (EV) sales and cobalt supply constraints drove cobalt prices higher in the second half of 2021. Cobalt is an essential component of batteries that power EVs. According to the International Energy Agency (IEA), electric car sales will more than double to 6.6 million in 2021, representing close to 9% of the global automobile market.
In addition, the Biden administration's plan to invoke the Defense Production Act to promote domestic production of minerals required to make batteries for EVs and long-term energy storage should further fuel the cobalt industry’s growth. Benchmark Mineral Intelligence forecasts a 13% CAGR in demand for cobalt for the next 10 years.
So, given the industry's solid growth prospects, we think it could be wise to invest in fundamentally sound cobalt stocks Vale S.A. (VALE), Glencore plc (GLNCY), and Freeport-McMoRan Inc. (FCX).
Click here to checkout our Electric Vehicle Industry Report for 2022
Vale S.A. (VALE)
Headquartered in Rio de Janeiro, Brazil, VALE and its subsidiaries produce and sell iron ore and iron ore pellets for use as raw materials in steelmaking in Brazil and internationally. Ferrous Minerals and Base Metals segments are the company’s two operational segments.
VALE's net operating revenue amounted to $13.11 billion for the fourth quarter, ending Dec. 31, 2021. Its operating income increased 21.8% year-over-year to $3.56 billion, while its net income increased 634.4% from its year-ago value to $5.43 billion. And its EPS increased 664.3% from its prior-year quarter to $1.07.
Analysts expect VALE's revenue to increase 3.3% year-over-year to $13.10 billion in the third quarter, ending Sept. 30, 2022. Furthermore, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 42.6% in price year-to-date and 43.3% over the past six months.
VALE's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock also has an A grade for Quality and a B for Value and Sentiment. Within the Industrial – Metals industry, it is ranked #7 of 36 stocks.
To see additional POWR Ratings for Growth, Stability, and Momentum for VALE, click here.
Click here to check out our Industrial Sector Report for 2022
Glencore plc (GLNCY)
Based in Baar, Switzerland, GLNCY produces, refines, processes, stores, transports, and markets metals and minerals, and energy products in the Americas, Europe, Asia, Africa, and Oceania. The company has two operational segments: Marketing Activities and Industrial Activities.
For its fiscal year ending Dec. 31, 2021, GLNCY's revenue increased 43.1% year-over-year to $203.75 billion. Its income for the year amounted to $4.35 billion, versus a $3.95 billion loss in the prior year, while its cash and cash equivalent stood at $3.24 billion. The company's EPS came in at $0.37 compared to a $0.14 loss per share in the previous year.
The stock has gained 66.5% in price over the past year and 52.6% over the past nine months.
GLNCY's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has a B grade for Growth, Stability, and Quality. Within the Miners - Diversified industry, it is ranked #2 of 47 stocks.
In total, we rate GLNCY on eight distinct levels. Beyond what we have stated above, we have also given GLNCY grades for Momentum, Value, and Sentiment. Get all the GLNCY ratings here.
Freeport-McMoRan Inc. (FCX)
FCX in Phoenix, Ariz., mine for minerals in North America, South America, and Indonesia. The company primarily explores for copper, gold, molybdenum, silver, other metals, and oil and gas. The company also functions as a portfolio of oil and gas properties located primarily in offshore California and the Gulf of Mexico.
In the fourth quarter, ended Dec. 31, 2021, FCX's revenue increased 37.1% year-over-year to $6.16 billion. Its operating income grew 34.9% from its year-ago value to $2.31 billion, while the net income increased 56.2% from its prior-quarter period to $1.11 billion. The company's EPS has climbed 54.2% year-over-year to $0.74.
Analysts expect FCX's revenue to increase 30.7% year-over-year to $6.34 billion in the first quarter, ending March 31, 2022. The $0.85 consensus EPS estimate for the first quarter ending March 31, 2022, represents a 66.9% improvement year-over-year. Also, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
The company's shares have surged 51.3% in price over the past year and 53.2% over the past six months.
It is no surprise that FCX has an overall B rating, which equates to Buy in our POWR Ratings system. FCX has a B grade for Quality. In the Industrial - Metals industry, it is ranked #14.
Click here to see the additional POWR Ratings for FCX (Stability, Growth, Sentiment, Value, and Momentum).
VALE shares were trading at $20.61 per share on Friday afternoon, up $0.62 (+3.10%). Year-to-date, VALE has gained 52.59%, versus a -4.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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