Tenaris is forming a flat base after coming out of a cup with handle. This steel stock is today's IBD 50 Stocks to Watch pick and a leader in the rising industry group.
Tenaris manufactures steel pipes for the energy industry and other industrial uses, including offshore oil rigs and pipes for oil, gas, water and mineral slurries. The company incorporates steelmaking, pipe rolling and forming, heat treatment, and threading and finishing in 16 countries.
It holds the top spot out of 16 stocks in the Steel-Producers industry group, according to IBD Stock Checkup. The group ranks an elite 9th out of 197 IBD groups, moving up quickly from 48th four weeks ago.
The Luxembourg-based company has gained over 65% year to date, considerably higher than the 24% for the broader industry group. The steel stock has booked a string of strong quarters, with earnings up 84% in the latest reporting period.
Steel Stock Nears Buy Point Once Again
Tenaris is in a newly-formed flat base and making its second attempt at mounting the 35.15 buy point. The base emerged after the stock gapped up on Nov. 15 in heavy volume and passed the 34.19 buy point of a cup-with-handle base, following its Q3 earnings report on Nov. 3. TS stock has been trading sideways in the base in choppy action since the breakout.
MarketSmith shows a 3-weeks-tight pattern. In addition, the stock's relative strength line just hit a new high, as indicated by the blue dot.
The steel stock is back above its 21-day exponential moving average, after dropping below it several times in December while testing the 50-day moving average. Shares have found support at the 21-day line.
Its share price is about 2% off its 52-week high. The superior 96 Relative Strength Rating supports its strong performance, as it has outperformed 96% of the stocks in the IBD database.
Triple-Digit EPS Growth
Tenaris posted $1.03 EPS in Q3, down from $1.08 in Q2 but considerably higher than the 85 cents earned in Q1. Analysts are projecting impressive 130% EPS growth for fiscal 2022, dropping to 8% in 2023.
Sales have grown consistently, up 70%, 83% and 100% in the last three quarters.
The 31.8% Q3 EBITDA margin increased from 28.8% in the prior quarter and 21.6% in the prior year's quarter. The improved EBITDA (earnings before interest, taxes, depreciation and amortization) was attributed to a higher average selling price, which offset increases in raw material and energy costs.
The company sees 4th quarter sales growth getting a lift from higher prices and growth in shipments to pipeline projects.
Steel companies could benefit from the recently passed Infrastructure Investment and Jobs Act that allocates funds to new roads, bridges and construction projects.
The steel stock pays out an attractive 2.6% annualized dividend yield to shareholders.
ESG Initiatives To Reduce Carbon Footprint
Tenaris uses 82% recycled steel, generated by electric arc furnaces that recycle scrap steel. It notes that recycling scrap metal preserves nonrenewable resources, uses less energy and emits fewer greenhouse gases.
The steel maker is launching the first industrial-scale project to decarbonize the steel sector by introducing green hydrogen into specific production processes.
The Italy-based project aims to generate hydrogen and oxygen, by refabricating steel production to use green hydrogen instead of natural gas. The process strives to significantly reduce steel direct emissions, by up to 73%.
