With copper hitting a six-year low this week, some companies could benefit from the metal’s big decline.
Erin Gibbs of S&P Investment Advisory is watching the telecom, construction and automaker sectors for companies that could get a profit boost from lower copper prices.
One standout name is Acuity Brands, Gibbs said, with a net margin of more than 42 percent. Meanwhile, the electric and lighting manufacturer is expected to see earnings growth of 26 percent over the next year, she said.
“They’re not only changing it from having lower costs, but also increasing on the revenue side,” Gibbs said Monday on “Trading Nation.” “We think there are some opportunities there.” The company’s stock has risen about 54 percent year to date.
Sven Eenmaa, who covers the stock for Stifel, said that while savings on lighting projects from lower commodity prices will get passed on to consumers over time, Acuity Brands should see a near-term boost. Another analyst that covers the stock said that tailwinds from cheaper metals and plastics that have broadly benefited lighting companies should taper off in the second half of 2016.
But for the red metal itself, the outlook isn’t so bright, according to technician Ari Wald of Oppenheimer.
“We don’t see the turn higher from here. Our view is that a lot of commodities that are priced in U.S. dollars are now in secular decline,” Wald said Monday on “Trading Nation.”
Copper prices have tumbled 25 percent this year to about $216. And while the commodity looks to be oversold, Wald said investors should sell any bounces they see at the $220 level, which has turned into resistance from previous support.
“For copper, the trend is established lower. It’s been making lower lows, lower highs. I think in terms of levels on the upside, you want to sell strength,” he said.
Disclosure: Erin Gibbs does not hold Acuity Brands in any personal or model portfolio positions.
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