10 Stocks Set to Surge from the Trump Tariffs in 2018

10 Stocks Set to Surge from the Trump TariffsPosted on Friday, August 17th, 2018 by MarketBeat Staff

Since the Trump administration’s announcement of tariffs on aluminum and steel in March, many analysts have been debating the meaning of the Trump tariffs. Are they protectionist measures to help the U.S. steel and aluminum industries? Are they meant to protect the intellectual property of U.S. technology companies doing business with China? Are they a negotiating tactic to help the U.S. rewrite trade deals that President Trump has stated are imbalanced toward our country?

The answer seems to be all of the above. The good news for you as an investor is that when it comes to tariffs and trade the market assigns winners and losers pretty clearly. Just follow the money. What companies stand to profit from higher-priced foreign imports? What companies will be hurt when foreign markets become less receptive to their imports?

The final story of the tariffs is still being written, but you can use the uncertainty surrounding the tariffs as an opportunity to profit… if you know where to look.

In the following slides, we’ll review 10 stocks that are set to surge from the Trump tariffs. In some cases, the business is in a sector that will obviously benefit from a tariff imposed on foreign countries; in other cases, the companies are defensive stocks whose businesses are buffered from the trade war and are well positioned for growth.

#1 - Nucor (NYSE:NUE)

Nucor logoNucor (NYSE: NUE) – Nucor stands to be a clear winner as manufacturers look for cheaper alternatives to imported steel. They are the largest manufacturer of steel and steel products in the United States. Not only that, but the major sectors they serve (automotive, construction, and energy) have a large need for steel that is not going to change. In their most recent earnings report, they cited a 107% increase in earnings to $2.07/share with revenue that was up 25% to $6.46 billion. By industry standards, the company saw their supply chain make up for any drop in imports with an increase in orders from domestic companies. While giving credit to the tariffs for increasing selling prices and shipments, CEO John Ferriola also cited the company’s long-term strategy geared at initiatives that left Nucor well-positioned to profit from a rebounding steel market. The company is projecting earnings to continue to show strength in the third quarter with a forecast price of $2.15 per share.

About Nucor
Nucor Corporation manufactures and sells steel and steel products in the United States and internationally. It operates in three segments: Steel Mills, Steel Products, and Raw Materials. The Steel Mills segment produces hot-rolled, cold-rolled, and galvanized sheet steel products; hollow structural section steel tubing, steel electrical conduit, plate steel, and structural steel products; bar steel products, such as blooms, billets, concrete reinforcing and merchant bars, wire rods, and special bar quality; and tubular and plate steel products. This segment sells its products to steel service centers, fabricators, and manufacturers in automotive, energy, agricultural, heavy equipment, and transportation sectors. The Steel Products segment produces steel joists and joist girders, steel decks, fabricated concrete reinforcing and cold finished steel products, steel fasteners, metal building systems, steel gratings and expanded metal, and wire and wire mesh products to general contractors, fabricators, distributors, and manufacturers. Its products are used by contractors in constructing highways, bridges, reservoirs, utilities, hospitals, schools, airports, stadiums, and high-rise buildings. The Raw Materials segment produces direct reduced iron; processes ferrous and nonferrous metals; brokers ferrous and nonferrous metals, pig iron, hot briquetted iron; supplies ferro-alloys; and processes ferrous and nonferrous scrap metal, as well as engages in the natural gas drilling operations. This segment sells its ferrous scrap to electric arc furnace steel mills and foundries for use in manufacturing process; and nonferrous scrap metal to aluminum can producers, secondary aluminum smelters, steel mills and other processors, and consumers of various nonferrous metals. The company offers its products through its in-house sales forces; and internal distribution and trading companies. The company was founded in 1940 and is based in Charlotte, North Carolina.

Current Price: $65.09
Consensus Rating: Buy
Ratings Breakdown: 8 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $71.0867 (9.2% Upside)

#2 - United States Steel Corporation (NYSE:X)

United States Steel logoUnited States Steel Corporation (NYSE: X) – Another steel manufacturer that is likely to benefit from the tariffs is U.S. Steel. Like Nucor, U.S. Steel’s customer base spans the industries that are in most need of steel including appliances and industrial machinery. The company announced the restarting of the second of two blast furnaces that would result in hiring 300 workers. With steel prices up almost 38% in 2018, including more than 13% since March 1, the stock is reporting solid fundamentals with a balance sheet and earnings growth that are stronger than their peers. The company’s revenues are expected to increase by over a billion dollars with earnings per share forecast to rise over 200 percent to $4.15. However, the benefit to their stock hasn’t quite materialized. The stock is still trading at just below $30 per share, but Bank of America has given the stock a $49 price target which would be above its current 52-week high of $47.64.


About United States Steel
United States Steel Corporation produces and sells flat-rolled and tubular steel products primarily in North America and Europe. It operates through three segments: Flat-Rolled Products (Flat-Rolled), U. S. Steel Europe (USSE), and Tubular Products (Tubular). The Flat-Rolled segment offers slabs, rounds, strip mill plates, sheets, and tin mill products. This segment serves customers in the service center, conversion, automotive, construction, container, and appliance and electrical markets. The USSE segment provides slabs, sheets, strip mill plates, tin mill products, and spiral welded pipes, as well as heating radiators and refractory ceramic materials. This segment serves customers in the construction, service center, conversion, container, transportation, appliance and electrical, oil, gas, and petrochemical markets. The Tubular segment offers seamless and electric resistance welded steel casing and tubing products; and standard and line pipe and mechanical tubing products primarily to customers in the oil, gas, and petrochemical markets. The company also provides railroad services; and owns, develops, and manages various real estate assets. United States Steel Corporation was founded in 1901 and is headquartered in Pittsburgh, Pennsylvania.

Current Price: $30.06
Consensus Rating: Hold
Ratings Breakdown: 6 Buy Ratings, 5 Hold Ratings, 3 Sell Ratings.
Consensus Price Target: $42.2536 (40.6% Upside)

#3 - Century Aluminum Company (NASDAQ:CENX)

Century Aluminum logoCentury Aluminum Company (NASDAQ: CENX) – Another direct beneficiary of the Trump tariffs is Century Aluminum. In direct response to the relief from competitors being provided by the tariffs, CEO Michael Bless announced that the tariffs allow Century Aluminum “to bring back 150,000 tons of production in its Kentucky plant.” With that increased production, the company is looking to invest $100 million and hire 300 workers. Two-thirds of the companies $1.5 billion in sales is from their U.S. operations. In their second-quarter earnings report, the company cited strong downstream demand, particularly in the United States, and projects a year-over-year increase in industrial production of roughly 60 percent by the end of 2018. The company reported second-quarter net income of $19.4 million or $0.20 per share compared to $7.1 million or $0.07 per share in the same quarter last year. All this positive news is not reflected in their stock price, which is still trading at a discount to the rest of the industry, but is up by nearly 10 percent since the tariffs were announced.


About Century Aluminum
Century Aluminum Company, together with its subsidiaries, produces standard-grade and value-added primary aluminum in the United States and Iceland. The company was founded in 1995 and is headquartered in Chicago, Illinois.

Current Price: $12.82
Consensus Rating: Buy
Ratings Breakdown: 4 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $21.40 (66.9% Upside)

#4 - Comtech (NASDAQ:CMTL)

Comtech Telecomm. logoComtech (NASDAQ: CMTL) – The steel and aluminum industries aren’t the only projected winners from the Trump tariffs. U.S. businesses in the communications technology sector are poised to benefit, particularly those companies that operate as defense contractors.Comtech is a good example of that. The company, which designs and develops innovative products for advanced communication solutions, reported record earnings growth of 232.4 percent for the current year, and they recently announced $32.5 million in new orders from the U.S. Army PM Tactical Network. This is on the heels of the announcement that their Enterprise Solutions group was awarded multi-year contracts totaling $19.5 million with a global telecom partner for services and applications related to its virtual short messaging service center. In its most recent earnings report, Comtech announced net sales of $147.9 million with $14 million in operating income and GAAP net income of $8.2 million or $0.34 per diluted share. The company is maintaining its revenue target of $570-$585 million.


About Comtech Telecomm.
Comtech Telecommunications Corp. designs, develops, produces, and markets products, systems, and services for communications solutions. The company's Commercial Solutions segment provides ground-based equipment, such as single channel per carrier modems and solid state amplifiers that facilitate the transmission of voice, video, and data, as well as offers traveling wave tube amplifiers comprising high power narrow-band amplifiers that are used to amplify signals from satellite earth stations; and safety and security technology solutions that enable 911 c. This segment also offers enterprise application technologies, including location-based technology, such as Trusted Location, a software-based scoring system that allows providers to determine mobile location and identify fraudulent behavior and other security risks; Look4, an application that enables customers to build their own applications; Indoor Location, a solution that enables the determination of a cell phone user's geospatial position; text messaging platforms that are used by wireless carriers to provide short-messaging services and to communicate with 911 public safety answering points; and VirtuMedix, a digital health platform that enables virtual healthcare. The company's Government Solutions segment provides command and control technologies, including tactical communications, managed networks, logistics, and end-to-end integration; cyber security training and computer network operations; and satellite-based mobile communications and tracking systems. This segment also offers over-the-horizon microwave systems, such as equipment and systems that transmit digitized voice, video, and data; and solid state high power broadband amplifiers designed for radar, electronic warfare, jamming, medical, and aviation applications. The company serves commercial and government customers worldwide. Comtech Telecommunications Corp. was founded in 1967 and is headquartered in Melville, New York.

Current Price: $32.62
Consensus Rating: Buy
Ratings Breakdown: 4 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $33.20 (1.8% Upside)

#5 - Verizon (NYSE:VZ)

Verizon Communications logoVerizon (NYSE: VZ) – Sometimes being a winner in a trade war means you just aren’t playing. Such is the case for Verizon. It’s considered a defensive stock because it competes in an industry that is unlikely to be affected by tariffs. After all, demand for telecommunication networks and providers is not going down. Verizon is reporting very strong fundamentals. In June, the stock received an upgrade from Deutsche bank as investors saw the company’s shares trading at a discount to the industry as a whole. Verizon’s stock is still trading slightly below Deutsche Bank’s price target of $56, meaning there’s still room for the stock to run. Analyst Matthew Niknam saw the fundamentals for the wireless industry to be improving after a wave of consolidations including the recent merger of T-Mobile and Sprint. Verizon also recently announced a transition to a 5G network that will provide new avenues for growth including direct-to-home wireless internet.


About Verizon Communications
Verizon Communications Inc., through its subsidiaries, offers communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide. The company's Wireless segment provides wireless voice and data services; Internet access on various notebook computers and tablets; multimedia, business-focused, and location-based services, as well as international travel services; and network access services to deliver various Internet of Things products and services. This segment also provides wireless devices, including smartphones and basic phones, wearables, and tablets and other Internet access devices. As of December 31, 2017, it had 116.3 million retail connections. Its Wireline segment offers traditional circuit-based network products and services; networking solutions, comprising private Internet protocol (IP), Ethernet, and software-defined wide area network, as well as cyber security services; local exchange, regional, long distance, and toll-free calling services; voice messaging and conferencing services; and workforce productivity and customer contact center solutions, as well as residential fixed connectivity solutions, including Internet, TV, and voice services under the Fios brand name. This segment also provides premises equipment, as well as installation, maintenance, and site services; data, voice, local dial tone, and broadband services primarily to local, long distance, and wireless carriers; voice and networking products, Fios services, IP networking, voice solutions, security, and managed information technology services for small and medium businesses, state and local governments, and educational institutions; and security and managed network services. The company was formerly known as Bell Atlantic Corporation and changed its name to Verizon Communications Inc. in June 2000. Verizon Communications Inc. was founded in 1983 and is headquartered in New York, New York.

Current Price: $53.79
Consensus Rating: Buy
Ratings Breakdown: 15 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $55.1053 (2.4% Upside)

#6 - Raytheon Corporation (NYSE:RTN)

Raytheon logoRaytheon Corporation (NYSE: RTN) – Raytheon was already a beneficiary of the "Trump Effect" –the surge in stocks after President Trump's election in 2016. The stock of the multinational aerospace and defense contractor rose nearly 46 percent since the election and after a brief contraction looks poised to rise again. This time, the company should benefit from the Trump tariffs. The company is well-positioned to withstand the tariffs. According to CEO Tom Kennedy, the company does not import from China and they are already purchasing the bulk of their steel and aluminum purchases from American manufacturers, meaning they will not be facing the same cost pressures as competitors. Internationally, many American allies are increasing their investment in defense spending to meet new NATO requirements. This has caused the company’s revenue from international sales to increase to nearly 32 percent and continues to trend up. First-quarter net sales were up 4.5% from the same period in 2017 at $6.3 billion with an earnings per share of $2.20, a year-over-year increase of over 27 percent.


About Raytheon
Raytheon Company develops integrated products, services, and solutions for defense and other government markets worldwide. It operates through five segments: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS); and Forcepoint. The IDS segment provides integrated air and missile defense; land and sea-based radar solutions; command, control, communications, computers, cyber, and intelligence solutions; and naval combat and ship electronic systems. The IIS segment offers a range of technical and professional services, such as intelligence, surveillance and reconnaissance, navigation, DoD space and weather, cybersecurity, analytics, training, logistics, mission support, engineering, and automation and sustainment solutions; and air traffic management systems. The MS segment develops and supports a range of weapon systems, including missiles, smart munitions, close-in weapon systems, projectiles, kinetic kill vehicles, directed energy effectors, and combat sensor solutions. The SAS segment provides electro-optical/infrared sensors, airborne radars for surveillance and fire control applications, lasers, precision guidance systems, signals intelligence systems, processors, electronic warfare systems, and communication and space-qualified systems. The Forcepoint segment develops cyber security products comprising insider threat solutions, data loss prevention, firewall technology, cross domain transfer, and cloud and on premise Web and email security products. The company serves the U.S. Department of Defense, the U.S. Intelligence Community, the U.S. Armed Forces, the Federal Aviation Administration, the National Oceanic and Atmospheric Administration, Department of Homeland Security, the National Aeronautics and Space Administration, and other international customers. Raytheon Company was founded in 1922 and is headquartered in Waltham, Massachusetts.

Current Price: $207.97
Consensus Rating: Buy
Ratings Breakdown: 14 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $224.50 (7.9% Upside)

#7 - Rockwell Automation (NYSE:ROK)

Rockwell Automation logoRockwell Automation (NYSE: ROK) – One of the effects of the tariffs is that U.S. businesses seeking to do business overseas will instead turn to automation as a way of reducing their costs. And the countries that are facing the increased costs due to the tariffs will also be looking to automation as a way to bring their costs down. This is causing a trend toward more spending in this sector to accelerate. And as the largest producer of the robots and automation equipment, Rockwell is poised to be one of the big winners from the tariffs. This leadership is also evident in its stock which has outperformed the industry over the past year. Rockwell’s stock has gained 5 percent, outpacing the industry as a whole by 3 percent, and they have an inventory turnover ratio that is 0.1 percent higher than the industry average (6.7% to 6.6%). Although Rockwell does source some products and components from China, the entire sector will face the same issue, meaning the overall forecast for the company remains positive.

About Rockwell Automation
Rockwell Automation Inc. provides industrial automation and information solutions worldwide. It operates in two segments, Architecture & Software; and Control Products & Solutions. The Architecture & Software segment provides control platforms, including controllers, electronic operator interface devices, electronic input/output devices, communication and networking products, and industrial computers that perform multiple control disciplines and monitoring of applications, such as discrete, batch and continuous process, drives control, motion control, and machine safety control. This segment also offers configuration and visualization software, which is used to operate and supervise control platforms, process control software, and manufacturing execution systems and information solution software to enhance productivity and meet regulatory requirements; and other products comprising sensors, machine safety components, and linear motion control products. The Control Products & Solutions segment offers low and medium voltage electro-mechanical and electronic motor starters, motor and circuit protection devices, AC/DC variable frequency drives, push buttons, signaling devices, termination and protection devices, relays, and timers; and various packaged solutions, such as configured drives and motor control centers to automation and information solutions. This segment also offers life-cycle support services, such as technical support and repair, asset management, training, maintenance, and safety and network consulting services. The company's brands include Allen-Bradley and Rockwell Software. It serves food and beverage, home and personal care, life sciences, automotive and tire, oil and gas, and mining and metal industries through independent distributors and direct sales force in the United States, Canada, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. Rockwell Automation Inc. was founded in 1903 and is headquartered in Milwaukee, Wisconsin.

Current Price: $194.81
Consensus Rating: Hold
Ratings Breakdown: 2 Buy Ratings, 10 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $182.9167 (-6.1% Upside)

#8 - CarMax (NYSE:KMX)

CarMax logoCarMax (NYSE: KMX) – If you're looking for a short-term play, CarMax is an ideal choice. As the tariffs set in, automakers are going to be passing on higher manufacturing costs to their customers. This may incent consumers who were thinking of buying a new car to shop for a used one instead. Enter CarMax, the largest retailer of used cars. And an interesting phenomenon is that the company’s biggest growth came in units sold wholesale to other dealers. This means consumers are trading in their cars at a CarMax store which then sells that car wholesale to other dealers. In their June earnings report, the company showed increased earnings of 18 percent that calculates to $1.33 a share. Revenue also surprised, coming in at $4.79 billion as opposed to estimates of $4.63 billion. The stellar report boosted their stock 12.9 percent. Going forward, the company has aggressive plans to open 15 new superstores in what the company is defining as small markets.

About CarMax
CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles in the United States. The company operates in two segments, CarMax Sales Operations and CarMax Auto Finance. It offers customers a range of makes and models of used vehicles, including domestic, imported, and luxury vehicles; vehicles that do not meet its retail standards to licensed dealers through on-site wholesale auctions; and extended protection plans to customers at the time of sale. The company also provides reconditioning and vehicle repair services; and financing alternatives for retail customers across a range of credit spectrum through its CarMax Auto Finance and arrangements with various financial institutions. In addition, it sells new vehicles under franchise agreements. As of April 4, 2018, the company operated 189 stores in 41 states. CarMax, Inc. was founded in 1993 and is based in Richmond, Virginia.

Current Price: $78.64
Consensus Rating: Buy
Ratings Breakdown: 13 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $83.3889 (6.0% Upside)

#9 - Turning Point Brands, Inc. (NYSE:TPB)

Turning Point Brands logoTurning Point Brands, Inc. (NYSE: TPB) – Think of TPB as the little engine that can. It is a $600 million small-cap stock that you may never have heard of. However, it makes its money through the sale of some of our country's most recognizable chewing tobacco and rolling paper brands. Because they derive much of their business from the U.S. market, their stock is largely protected from international disputes, which is what a tariff ultimately boils down to. Although they are a loud voice against the Trump tariffs as it relates to their vaping business, Turning Point Brands is benefiting because of its primary role as a defensive stock in the tobacco industry. The company has an expected earnings growth rate of 50 percent which shatters the industry average of 10.7 percent. Year-to-date the stock price is up 47.6 percent for the year, in contrast with the industry average of -21.9

About Turning Point Brands
Turning Point Brands, Inc., together with its subsidiaries, provides other tobacco products primarily in the United States. It operates through three segments: Smokeless Products, Smoking Products, and NewGen Products. The Smokeless Products segment manufactures and markets moist snuff; and contracts for and markets loose leaf chewing tobacco products. The Smoking Products segment imports and markets cigarette papers, tubes, and related products, as well as finished cigars, make-your-own cigar tobaccos, and cigar wraps; and processes, packages, and markets pipe tobaccos. The NewGen Products segment markets and distributes liquid vapor products, tobacco vaporizer products, and other products without tobacco and nicotine, including e-cigarettes, e-liquids, vaporizers, and other related products; and distributes various assortments of vaping products to non-traditional retail outlets through VaporBeast and Vapor Shark, as well as distributes various vaping related products to individual consumers through Vapor Shark branded retail outlets. The company sells its products under the Zig-Zag, Beech-Nut, Stoker's, Trophy, Havana Blossom, Durango, Our Pride, Big Mountain, Appalachia, Springfield Standard, Snake River, Tequila Sunrise, Fred's Choice, Old Hillside, Red Cap, Tennessee Chew, VaporBeast, and Vapor Shark brands. It sells its products to wholesale distributors and retail merchants in the independent and chain convenience store, tobacco outlet, food store, mass merchandising, and drug store and non-traditional retail channels. The company was formerly known as North Atlantic Holding Company, Inc. and changed its name to Turning Point Brands, Inc. in November 2015. Turning Point Brands, Inc. was incorporated in 2004 and is headquartered in Louisville, Kentucky.

Current Price: $41.68
Consensus Rating: Buy
Ratings Breakdown: 2 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $25.50 (-38.8% Upside)

#10 - Global Water Resources, Inc. (NASDAQ:GWRS)

Global Water Resources logoGlobal Water Resources, Inc. (NASDAQ: GWRS) – Another play in the small-cap sector is GWRS. In addition to being shielded from the tariff dispute, utility stocks are always a strong defense against market uncertainty. Global Water Resources has a strong earnings growth of 41.7 percent compared to the industry average of 13.9 percent. And for 2018, the stock price has increased 2.9 percent whereas the industry average is -13.5 Earlier this month, the company beat their quarterly earnings estimate by $0.05 a share ($0.11 vs. $0.06). The company also posted $10.84 million in revenues, beating analysts’ estimates by nearly 25%. This makes it four straight quarters that the company has beaten consensus revenue estimates. In July, the company announced that they have made underwritten public offering of 1,720,000 shares of common stock valued at $9.25 per share. The company anticipates using the net proceeds to fund acquisitions and to provide working capital.

 



About Global Water Resources
Global Water Resources, Inc., a water resource management company, owns, operates, and manages regulated water, wastewater, and recycled water utilities primarily in metropolitan Phoenix, Arizona. As of December 31, 2017, it served approximately 51,000 people in approximately 20,000 homes. The company was founded in 2003 and is based in Phoenix, Arizona.

Current Price: $10.19
Consensus Rating: N/A
Ratings Breakdown: 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: N/A

As an investor, the Trump tariffs are an opportunity for you to witness the way markets move. The Trump tariffs are one of the single largest stories impacting the market today, and the story is still being written.

A tariff always creates winners and losers because ultimately it causes costs to be shifted. For example, although the steel industry looks to benefit, the cost of items made from steel such as automobiles and washing machines are going to increase. This cost is going to be passed along to consumers.

But tariffs can also help promote efficiencies. U.S. manufacturers who are facing tariffs against their products being sold overseas will be looking for ways to automate their processes to better compete. This may result in the unintended consequence of lost jobs in some sectors just as other sectors are growing.

As an investor, you should be looking at the companies that are poised to directly benefit from the tariffs as well as look to add some defensive stocks that are protected from the uncertainty surrounding the tariffs.



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