(Dec 30): While tariffs and shaky consumer confidence continue to create headwinds for corporate America, they’re set to lift earnings growth for US materials stocks to the highest in five years.
Materials stocks — a group of companies ranging from steelmaker Nucor Corp and paint maker Sherwin-Williams Co to packaging manufacturers including Smurfit WestRock plc and Ball Corp — are set to see earnings rise 20% in 2026, Bloomberg Intelligence data shows. Only tech earnings are expected to grow faster.
Constituents active in the metals and packaging industries are set to get the biggest lift, as trade protections strengthen steel prices and a volume play by consumer goods makers is driving demand for everything from cereal boxes to soda cans. Both sub-sectors are expected to see earnings grow more than 30% next year.
Tariffs on US steel imports give domestic producers pricing leverage, BI analyst Richard Bourke said in a November note. “US mills should continue to displace imports as long as 50% Section 232 tariffs remain in place,” he wrote, referring to the trade act US President Donald Trump has used to impose levies.
Nucor, which has the broadest product line in the US and spare capacity, according to Bourke, signalled a higher backlog heading into 2026, driven by energy, infrastructure, data centres and manufacturing, according to a December statement. Current trade policy, it said, should “lead to continued gradual improvement in business conditions”.
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Peer Steel Dynamics Inc provided a similar sentiment about its backlog and expects lower interest rates to lead to increased infrastructure spending and onshoring, with improved volumes in 2026.
“A lot of the contracts are lag contracts, so they’re going to kind of show up next year,” Bourke said in an interview.
Tariffs are more of a headwind for packaging and container makers, though food makers have started to target volume growth through price promotions — a trend emerging at companies including General Mills Inc and PepsiCo Inc — which supports demand for suppliers like Amcor plc, Truist analyst Michael Roxland said in a note.
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Easier comparisons versus a year ago and recovering consumer confidence may also aid volumes for the group in the second half of next year, analysts at Jefferies said.
North American containerboard supply should be under “healthy tension” in 2026, with mills running close to full capacity, RBC analyst Matthew McKellar said in a note, supporting a price increase and adding to ongoing cost and efficiency efforts at International Paper Co and Smurfit WestRock.
A similar focus on internal levers is playing out across the packaging group.
Amcor expects to reach its 2026 outlook through synergies, without relying on macroeconomic improvement or a rebound in customer or consumer demand, CEO Peter Konieczny said on a call. The company forecast adjusted profit growth of 12% to 17% in constant currencies in a November release, the most in five years.
Increased volumes from packaged food makers isn’t something seen from the rest of the group’s client base and overall packaging demand remains mixed. That’s prompting companies to rely on cost cuts and operational changes — such as plant closures — to offset weak economic conditions and softer box demand.
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International Paper’s management warned at an industry conference in early December that demand remains sluggish as consumers and customers deal with inflation, tariffs and a weak housing market. Still, its earnings are set to return to growth after four straight years of declines.
“In North America, we still feel very tight from a supply-demand perspective,” chief financial officer Lance Loeffler said. “All we need is a little bit of spark on the demand side, and I think it would be really good for business.”
Federal Reserve rate cuts are expected to aid the other two remaining materials sectors, with chemicals seen returning to growth after three years of shrinking and construction materials reversing last year’s contraction.
Sherwin-Williams is set to enter the year with a supportive rate environment, with the paint maker seen benefitting from existing home sales recovering, according to Citigroup analyst Patrick Cunningham. Albemarle Corp stands out as another gainer in the year ahead as lithium prices improve on growing demand, especially from energy storage systems, Cunningham said.
In construction materials, companies like CRH plc should see demand strengthen as lower interest rates reduce borrowing costs. That’s “likely to spark confidence to close residential and nonresidential construction deals,” BI analyst Sonia Baldeira said in a note.
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