The steel sector came to a standstill last year due to the COVID-19 pandemic, with both the output and consumption of steel plunging. However, the industry has been witnessing a considerable uptick in demand and is poised to return to pre-pandemic levels in-part based on the Biden administration’s proposed $1.2 trillion Bipartisan Infrastructure Framework that includes historic investments to rebuild the U.S.  economy and infrastructure over the next eight years.

Since steel is widely used in construction and manufacturing activities, the potentially transformative investment opens enormous potential and development prospects for the industry. In addition, with the post-pandemic reopening of the economy, a substantial rise in construction and industry activities should propel the demand for steel. Indeed, the global steel market is expected to reach $1.01 trillion by 2025, representing  a 2.6% CAGR. Given this solid backdrop, we believe shares of steel companies Hillenbrand Inc. (HI) and Boise Cascade L.L.C (BCC) are attractively cheap at their current price levels. Therefore, investing in these stocks could be rewarding.

Click here to check out our Infrastructure Sector Report for 2021

Hillenbrand Inc. (HI)

Headquartered in Batesville, Indiana, HI is a global industrial company with various brands that serve many  sectors. The Process Equipment Group and Batesville are the two business segments through which the company operates.

During the second quarter, ended March 31, 2021, HI's net revenue increased 11.3% year-over-year to $722.3 million. The company’s net income came in at $78.1 million, compared to a $74 million net loss in the prior-year period. Its EPS came in at $1.03 for this quarter, compared to a $0.99 loss per share in the first quarter of 2020. Furthermore,  the company’s adjusted EBITDA increased 21.4% year-over-year to $134.3 million over this period.

A  $3.57 consensus EPS estimate for its fiscal year 2021 represents a 38.4% improvement year-over-year. The $2.81 billion consensus revenue estimate for the current year represents an 11.6% increase from the same period last year. The stock has gained 57.1% over the past year and 38.3% over the past nine months.

In terms of forward Price/Sales, HI is currently trading at 1.17x, which is 24.2% lower than the 1.54x industry average. The stock’s 12.42x forward P/E  is 40.7% lower than the 20.96x industry average.

HI's POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

HI has also been rated an A grade for Value and a B for Sentiment and Growth. Within the A-rated Industrial – Manufacturing industry, it is ranked #1 of 44 stocks.

To see additional POWR Ratings for Quality, Momentum, and Stability for HI, click here.

Click here to check out our Industrial Sector Report for 2021

Boise Cascade L.L.C (BCC)

BCC is a full-service wood product producer and construction materials distributor with locations across the United States and one manufacturing plant in Canada. Wood Products, Building Materials Distribution, and Corporate and Other are the three segments through which the company operates. New residential construction, home repair and renovation projects, light commercial construction, and industrial applications are where the company's products are most widely utilized. BCC is based in Boise, Idaho.

This month, BCC launched its new website for its millwork business. The website will feature exterior and interior doors and finish options, door hardware, and other related goods. This will enable the company to help its customers access a comprehensive range of product literature, videos, technical and warranty information through a hassle-free approach and further enhance its brand image.

During the first quarter, ended March 31, 2021, BCC’ sales increased 55.6% year-over-year to $1.82 billion. Its income from operations increased 703.5% year-over-year to $205.26 million, while its net income surged significantly from the prior-year quarter to $149.16 million. Its adjusted EBITDA grew 277.3% from the prior-year quarter to $224.94 million.

The company's EPS is expected to grow 165.3% year-over-year to $11.78 in the current year. Analysts expect BCC's revenue to increase 26.1% year-over-year to $6.91 billion in its fiscal year 2021. BCC's stock has gained 11.1% over the past year and 20.9% over the past nine months.

In terms of forward Price/Sales, BCC is currently trading at 0.27x, which is 82.3% lower than the 1.54x industry average. Also, the stock’s 4.16x forward P/E is 801% lower than the 20.96x industry average.

It is no surprise that BCC has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Growth and Value, and a B for Momentum and Quality. In the A-rated Industrial - Wood industry, it is ranked #2 of 6 stocks.

In addition to the POWR Ratings grades we have just highlighted, one  can see the BCC rating for Stability and Sentiment here.

Click here to check out our Infrastructure Sector Report for 2021

HI shares were trading at $43.38 per share on Monday morning, down $0.16 (-0.37%). Year-to-date, HI has gained 9.98%, versus a 14.41% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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