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The materials sector includes companies engaged in the discovery, development, and processing of raw materials, which are used across many other sectors and industries. Materials stocks include manufacturers of products as varied as plastic, fertilizer, paper, concrete, and metals. Some prominent names in the materials sector include DuPont de Nemours Inc. (DD), Ecolab Inc. (ECL), and Dow Inc. (DOW). The materials sector, as measured by the Materials Select Sector SPDR ETF (XLB), underperformed the S&P 500 by a wide margin in the last 12 months. XLB posted a 12-month trailing total return of 13.5% versus the S&P’s 25.3% as of January 28, 2020.
Below, we’ll examine the top three stocks in the materials sector for best value, fastest earnings growth, and most momentum.
Materials Stocks with the Best Value
Here are the materials stocks in the S&P 500 with the lowest 12-month trailing price-to-earnings (P/E) ratio in the sector. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
- Nucor Corp.: Nucor is a manufacturer of steel and steel products, including carbon and alloy steel, steel joints, steel deck, and metal building systems.
- LyondellBasell Industries NV: LyondellBasell is chemical company based in the Netherlands, engaging in the refining and production of plastic resins and other chemicals. These are used in the manufacturing including lightweight plastics, construction materials, automotive components, durable textiles, and bio fuels. The company recently signed a Memorandum of Understanding with China Petroleum & Chemical Corporation ADS (SNP) to form a 50/50 joint venture that will expand Asian business interests.
- Eastman Chemical Co.: In addition to chemicals for a wide variety of industrial uses, Eastman Chemical produces fibers, plastics, and additives. The company’s board declared a quarterly cash dividend of $0.66 per share of common stock in early December, a 6.5% increase and the 10th consecutive year the company has boosted its quarterly dividend.
Materials Stocks with the Fastest Earnings Growth
Here are the materials stocks in the S&P 500 with the highest year-over-year (YOY) earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.
- CF Industries Holdings Inc.: CF Industries engages in the manufacture and distribution of nitrogen and phosphate fertilizer products worldwide. In Q3 2019, CF Industries reported diluted earnings per share of $0.29, more than double the EPS from Q3 2018.
- Sherwin-Williams Co.: Sherwin-Williams develops, manufactures, and distributes paint, coatings, and related products. The company sells its products to professional, industrial, commercial, and retail customers. In Q3 2019, Sherwin-Williams saw diluted net income per share of $6.16, up 65.6% YOY.
- Martin Marietta Materials Inc.: Martin Marietta Materials provides aggregates for the construction industry, including crushed stone, sand, and gravel. The company also manufactures of magnesia-based products used in industrial, agricultural, and environmental applications.
Materials Stocks with the Most Momentum
These are the materials stocks in the S&P 500 that had the greatest total return over the past 12 months.
|Materials Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Sherwin-Williams Co. (SHW)||584.27||53.9||50.1|
|Martin Marietta Materials Inc. (MLM)||259.54||16.2||49.1|
|Air Products & Chemicals Inc. (APD)||233.47||51.5||48.2|
|Materials Select Sector SPDR ETF (XLB)||N/A||N/A||13.5|
- Sherwin-Williams Co.: See above for company description.
- Martin Marietta Materials Inc.: See above for company description.
- Air Products & Chemicals Inc.: Air Products & Chemicals is a company engaged in the manufacture and distribution of atmospheric and specialty gases, as well as related products. The company provides oxygen, nitrogen, argon, helium, polyurethane, epoxy curatives, and resins.
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