US material sector becomes the "hidden winner" of Trump's tariff policy! Profit growth in 2026 is expected to reach a five-year high.

Despite the uncertainty caused by the Trump administration's tariff policies and fluctuating consumer confidence continuing to pose challenges for American businesses, the earnings growth of US material stocks is expected to climb to its highest level in five years in 2026. Industry research data shows that the earnings of the material sector in 2026 are projected to increase by 20% - this sector includes a range of companies such as steel manufacturer Nucor Corporation (NUE.US), paint manufacturer Sherwin-Williams (SHW.US), packaging manufacturer Smurfit WestRock (SW.US), and Ball Corporation (BALL.US), with earnings growth expected to be second only to the technology sector. Earnings growth in the material sector in 2026 is projected to surpass the S&P 500 index Companies active in the metal and packaging industries are expected to receive the biggest boost in earnings, as the Trump administration's trade protection measures have strengthened steel prices and strategies to drive sales by consumer goods manufacturers have also boosted demand for various types of packaging from cereal boxes to soda cans. Earnings in these two sub-sectors are both expected to grow by over 30% next year. Packaging and metal sub-industries will lead earnings growth in the material sector Industry research analyst Richard Burke pointed out in a report in November that the tariffs imposed on steel imports by the US give domestic steel producers pricing power. He stated, "As long as the 50% tariff based on the 232 provisions remains in place, producers like United States Steel Corporation should continue to substitute imports." He was referring to the trade act used by Trump to impose tariffs. Burke also added that Nucor Corporation has the most extensive product line and idle capacity in the US. The company stated in a December announcement that its backlog of orders is showing an increasing trend as it enters 2026, driven by energy, infrastructure, data centers, and manufacturing. The company expressed that the current trade policies should result in a "gradual improvement in operations." Nucor Corporation's peer, Steel Dynamics (STLD.US), also shared a similar view regarding its backlog of orders and expects that lower interest rates will lead to increased infrastructure spending and reshoring in manufacturing, boosting sales in 2026. Burke commented, "Many contracts are lagging contracts, so they will mostly show up next year." Most metal companies are expected to experience a recovery next year Truist analyst Michael Roxland stated that while tariffs are more of a challenge for packaging and container manufacturers, food manufacturers have begun to achieve sales growth through promotions - a trend reflected in companies like General Mills, Inc. (GIS.US), PepsiCo, Inc. (PEP.US), supporting demand for consumer goods packaging suppliers like Amcor (AMCR.US). Analysts at Jefferies Financial Group Inc. also believe that easier year-over-year comparisons and a recovery in consumer confidence may drive sales in the second half of next year. Royal Bank of Canada analyst Matthew McKellar stated in a report that the supply of North American containerboard paper in 2026 should be in a "healthy tension," with factories operating at close to full capacity, supporting price increases and promoting cost and efficiency optimization efforts by International Paper Company (IP.US) and Smurfit WestRock. Similar focus on internal operational leverage is taking place across the packaging sector. Amcor CEO Peter Konieczny stated in a conference call that the company expects to achieve its 2026 outlook through synergies without relying on macroeconomic improvements or a rebound in customer and consumer demand. The company's report released in November predicted a growth of 12% to 17% in adjusted profits, the highest growth rate in five years. However, the sales growth from packaging food manufacturers has not been evident in other customer segments of the packaging sector, with overall packaging demand still mixed. This has led companies in the packaging industry to rely on cost-cutting and operational adjustments (such as factory closures) to offset the impact of soft economic conditions and sluggish demand for boxes. The management of International Paper Company warned at an industry conference in early December that demand remains weak amid consumer and customer coping with inflation, tariffs, and a soft real estate market. Despite this, the company's earnings are expected to recover growth after declining for four consecutive years. CFO of International Paper Company, Lance Loeffler, stated, "In North America, from a supply-demand perspective, we still feel very tight. We just need a spark in demand, and I think that's going to be very favorable for the business." Additionally, the prospect of a rate cut by the Federal Reserve is expected to benefit two other major industries in the material sector - the chemical industry is expected to recover growth after three consecutive years of contraction, and the building materials industry is expected to reverse last year's decline. Citigroup analyst Patrick Cunningham believes that Sherwin-Williams will start the new year in a favorable interest rate environment, benefiting from the recovery in existing home sales. Cunningham also pointed out that Albemarle (ALB.US) is another winner in the coming year as lithium prices are improving with growing demand, especially from energy storage systems. In the building materials sector, companies such as CRH public limited company (CRH.US) are expected to see enhanced demand as lower rates reduce borrowing costs. Industry research analyst Sonia Balderrama stated in a report that this "may ignite confidence in residential and non-residential construction transactions."