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3 Top-Rated Commodity Stocks to Buy With Inflation at 40-Year Highs: Freeport-McMoRan, Vale, and SunCoke Energy

Inflation is already at 40-year highs and could rise further as the Russia-Ukraine crisis worsens. Moreover, President Biden banning Russian oil imports in response to Putin’s invasion of Ukraine could add to the inflationary fumes. Because commodity prices rise when inflation is accelerating, they act as inflationary hedges. Thus, top-rated commodity stocks, Vale (VALE), Freeport-McMoRan (FCX), and SunCoke (SXC), could be ideal bets now.

Consumer prices surged more than expected over the past 12 months, with the Consumer Price Index reading in January 2022 climbing by a whopping 7.5%, the highest since February 1982. Core inflation rose at its fastest level since August 1982. Inflation is already at a 40-year high, and disruptions in the Russia-Ukraine war front could cause commodity prices to rise further, as Russia is a significant exporter of oil and gas, industrial metals, precious metals, fertilizers, and soft commodities. Adding to the inflationary pressure is President Biden banning Russian oil, natural gas, and coal imports to the U.S. in response to the Russian invasion of Ukraine.

And, because commodity prices rise when inflation is accelerating, they offer protection from the effects of inflation. Moreover, commodity prices have been on the rise over the past year as the economy gradually began setting back into the pre-pandemic picture with businesses reopening, leading to heightened demand for raw materials amid the pandemic-led supply disruption.

As commodity prices typically remain strong amid inflation, top-rated commodity stocks, Vale S.A. (VALE), Freeport-McMoRan Inc. (FCX), and SunCoke Energy, Inc. (SXC), could be the ideal addition to your portfolio as a hedge against inflation.

Vale S.A. (VALE)

Based in Brazil, VALE is a global producer and seller of iron ore and iron ore pellets, key raw materials used for steel making. It also produces copper, potash, manganese ore, ferroalloys, metallurgical and thermal coal, phosphates and other fertilizer nutrients, platinum group metals, gold, silver, and cobalt. The company operates through three segments: Ferrous Minerals; Base Metals; and Coal segments.

Last month, VALE and Hunan Valin Iron & Steel Group signed a Memorandum of Understanding (MoU) to pursue ironmaking solutions focused on reducing CO2 emissions. This initiative is aligned with VALE’s commitment to reduce 15% of net Scope 3 emissions by 2035. Also, the company aims to achieve net-zero by 2050.

In the same month, the company also informed that its Totten Mine has safely resumed operations and is ramping up production. The mine has been under repairs since last year. The resumption of this mine should help improve VALE’s operational capabilities.

VALE’s operating income grew 21.8% from the year-ago value to $3.56 billion in the fiscal fourth-quarter ending December 2021. The company reported a net income of $5.50 billion, up 753.4% year-over-year, and its EPS increased 664.3% from its year-ago value to $1.07.

The company’s EPS is expected to increase 11.1% per annum over the next five years. Also, it has an impressive earnings surprise history, as it topped Street EPS estimates in each of the trailing four quarters. 

VALE has gained 15.1% over the past year to close the last trading session at $19.82. It has gained 41.4% year-to-date.

VALE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to Strong Buy in our POWR ratings system. The POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

VALE also has an A grade in Quality and a B for Value and Sentiment. The stock is ranked #4 of 36 stocks in the Industrial – Metals industry.

In addition to the POWR Ratings grades I’ve just highlighted, you can see the VALE ratings for Growth, Momentum, and Stability here.

Freeport-McMoRan Inc. (FCX)

FCX is a mining company engaged in mining mineral properties in North America, South America, and Indonesia. The company’s segments include refined copper products; copper in concentrate; gold; molybdenum; and others. It also operates a portfolio of oil and gas properties primarily located in offshore California and the Gulf of Mexico. As of December 31, 2021, it operated approximately 135 wells.

FCX’s revenues increased 37.1% year-over-year to $6.16 billion in the fiscal fourth quarter ended December 31, 2021. Its operating income grew 34.9% from the year-ago value to $2.31 billion, while its net income improved 58.3% year-over-year to $1.36 billion. Its EPS increased 54.2% from its year-ago value to $0.74.

Analysts expect FCX’s revenue for the first quarter ending March 2022 to come in at $6.40 billion, indicating a 31.9% year-over-year growth. The company’s EPS is expected to increase 68.8% year-over-year to $0.86 for the same quarter. The company also surpassed the consensus EPS estimates in three of the trailing four quarters.

FCX has gained 35.8% over the past year and 14.9% over the past month to close the last trading session at $46.67.

FCX’S POWR Ratings reflect this promising outlook. The company has an overall rating of B, translating to Buy in our proprietary rating system. FCX is also rated B in Quality. It is ranked #11 in the same industry.

To see additional POWR Ratings for Growth, Value, Momentum, Stability, and Sentiment for FCX, click here.

SunCoke Energy, Inc. (SXC)

Founded in 1960, SXC operates as an independent coke producer in the Americas and Brazil. It operates through three segments: Domestic Coke; Brazil Coke; and Logistics. The company designs, develops, owns, and operates five coke-making facilities in the United States and one in Brazil.

SXC’s sales and other operating revenue increased 17.8% year-over-year to $365.30 million in the fiscal fourth quarter ended December 31, 2021. Its operating income grew 483.3% from the year-ago value to $28 million. Net income attributable to SXC improved 354% year-over-year to $12.70 million over the period. Its EPS increased 350% from its year-ago value to $0.15.

Street expects SXC’s EPS for the fiscal year ending December 2022 to improve 30.8% year-over-year to $0.68. The consensus revenue estimate of $1.47 billion for the same period represents a 1.3% increase year-over-year.

SXC’s shares have gained 27.7% over the past year and 29.6% year-to-date to close the last trading session at $8.54. 

It is no surprise that SXC has an overall rating of B, translating to Buy in our POWR Ratings system. It has an A grade in Momentum and a B in Quality and Value. It is ranked #2 out of the 11 stocks in the A-rated Coal industry.

Beyond what is stated above, we’ve also rated SXC for Growth, Stability, and Sentiment. Get all the SXC ratings here.

VALE shares were trading at $18.72 per share on Wednesday afternoon, down $1.10 (-5.55%). Year-to-date, VALE has gained 33.52%, versus a -10.06% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.


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