The manufacturing industry is being impacted significantly by macroeconomic issues. The industry relies heavily on raw materials and labor, which are in short supply. Manufacturing output, on the other hand, increased by 0.1% in February, while capacity utilization remained stable at 78%.
However, given the industry’s solid growth prospects thanks to government initiatives and technological advancements, we think it could be wise to add quality manufacturing stocks Mueller Industries, Inc. (MLI) and Vishay Precision Group, Inc. (VPG) to your portfolio this year.
The Biden-Harris Administration announced $50 million in funding to make smart manufacturing technologies and high-performance computing more accessible to SMMs, allowing them to increase production efficiency and secure America's global manufacturing leadership.
The global smart manufacturing market is expected to grow at a 14.9% CAGR until 2030.
Let’s delve deeper into the fundamentals of MLI and VPG to understand why they have solid upside potential.
Mueller Industries, Inc. (MLI)
MLI manufactures and sells copper, brass, aluminum, and plastic products in the United States, the United Kingdom, Canada, South Korea, the Middle East, China, and Mexico. It operates through three segments: Piping Systems; Industrial Metals; and Climate.
MLI’s forward EV/EBIT of 6.72x is 53.8% lower than the industry average of 14.55x. Its forward EV/Sales multiple of 0.98 is 38.2% lower than the industry average of 1.59.
MLI’s trailing-12-month ROTA of 29.36% is 464.4% higher than the industry average of 5.20%. Its trailing-12-month ROTC of 35.02% is 398.8% higher than the industry average of 7.02%.
During the fourth quarter that ended December 31, 2022, MLI’s operating income increased 10.6% year-over-year to $190.41 million. Its net income attributable came in at $138.91 million, up 10.6% year-over-year. Also, its EPS came in at $2.46, up 11.3% year-over-year.
MLI’s revenue is expected to increase 5.1% year-over-year to $3.54 billion in 2024. Its EPS is expected to grow 6.2% year-over-year growth to $6.85 in 2024. It has surpassed EPS estimates in all four trailing quarters. The stock has gained 30.4% over the past nine months, closing the last trading session at $69.
MLI’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
MLI also has an A grade for Quality. It is ranked #12 out of 35 stocks in the A-rated Industrial – Manufacturing industry. To access additional ratings for MLI’s Growth, Value, Momentum, Stability, and Sentiment, click here.
Vishay Precision Group, Inc. (VPG)
VPG designs, manufactures, and markets specialized sensors, weighing solutions, and measurement systems. It operates through three segments: Sensors, Weighing Solutions, and Measurement Systems. The company offers its products under the Alpha Electronics, Powertron, Celtron, and Revere brands, among others.
VPG’s forward EV/Sales of 1.34x is 51.1% lower than the industry average of 2.74x. Its forward Price/Sales multiple of 1.35 is 50.2% lower than the industry average of 2.70.
VPG’s trailing-12-month asset turnover ratio of 0.77x is 26.6% higher than the 0.61x industry average. Its trailing-12-month ROTC of 7.70% is 270.4% higher than the 2.08% industry average.
For the fiscal fourth quarter ended December 31, 2022, VPG’s net revenue increased 6.9% year-over-year to $96.24 million. Its gross profit rose 13.8% from the year-ago value to $39.70 million. The company’s adjusted net earnings increased 35.1% year-over-year to $10.40 million, while its adjusted EPS grew 35.7% from the prior-year quarter to $0.76.
Analysts expect VPG’s revenue and EPS to increase 13.87% and marginally year-over-year to $412.88 million and $2.66, respectively. It has surpassed EPS estimates in all four trailing quarters. Over the past nine months, the stock has gained 44.4% to close the last trading session at $40.87.
VPG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It is ranked first in the same industry. It has an A grade for Sentiment and a B for Momentum, Value, Stability, and Quality. Click here to see VPG’s rating for Growth.
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MLI shares were trading at $69.30 per share on Wednesday afternoon, up $0.30 (+0.43%). Year-to-date, MLI has gained 17.96%, versus a 7.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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