The industrial sector is well-positioned for significant expansion, driven by its diverse demand, need for efficiency, growing manufacturing and processing activities, and continued innovations such as AI, IoT, and robotics.
Amid this backdrop, investors could consider investing in quality industrial stocks Illinois Tool Works Inc. (ITW), Cummins Inc. (CMI), and 3M Company (MMM) to buy and hold having significant potential.
The U.S. Industrial production increased 0.6% in June and 0.9% in May, indicating strong industrial activities and prospects. During the second quarter, the industrial production has grown at 4.3%, whereas manufacturing output surged 0.4% in June and 3.4% in the second quarter.
With expanding processes and operations, the demand for efficient equipment, machines, and tools are also rising.
The industrial machinery market is driven by the high demand for automation, modernization of production processes coupled with the expansion of the manufacturing sector and technological advancements like Internet of Things (IoT), Artificial Intelligence (AI), and Robotics to enhance the efficiency and productivity of their machinery.
The global industrial machinery market revenue is projected to grow to $1.04 trillion by 2032, exhibiting growth at a CAGR of 5.3% during the forecast period.
Given these favorable market trends, let’s look at the fundamentals of the top three Industrial - Machinery stocks, beginning with the third choice.
Stock #3: Illinois Tool Works Inc. (ITW)
ITW manufactures and sells industrial products and equipment internationally. The company operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products.
On May 3, ITW’s Board of Directors declared a dividend on the company's common stock of $1.40 per share for the second quarter 2024. The dividend was paid on July 11, 2024 to shareholders of record as of June 28, 2024.
ITW pays an annual dividend of $5.60, which translates to a yield of 2.30% at the current share price. Its four-year average dividend yield is 2.19%. Moreover, the company’s dividend payouts have increased at a CAGR of 7.1% over the past three years. ITW has raised its dividends for 28 consecutive years.
ITW reported operating revenue of $3.97 billion for the first quarter that ended March 31, 2024. Its operating income grew 15.9% from the year-ago value to $1.13 billion. The company’s net income came in at $819 million and $2.73 per share, up 14.7% and 17.2% from the prior-year’s quarter, respectively.
Furthermore, the company’s total assets stood at $15.65 billion as of March 31, 2024, compared to $15.52 billion as of March 31, 2023.
The company raised its full-year 2024 guidance for EPS by $0.30 to a range of $10.30 to $10.70.
Street expects ITW’s revenue and EPS for the second quarter (ended June 2024) to increase marginally and 2.4% year-over-year to $4.08 billion and $2.47, respectively. Also, the company has topped the consensus EPS estimate in each of the trailing four quarters.
Shares of ITW have increased 5.1% over the past month to close the last trading session at $243.83.
ITW’s bright prospects are reflected in its POWR Ratings. 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, each weighted to an optimal degree.
The stock has an A grade for Quality and a B grade for Stability. Within the A-rated Industrial - Machinery industry, ITW is ranked #37 out of 77 stocks.
Click here to access additional ratings of ITW for Momentum, Sentiment, Value, and Growth.
Stock #2: Cummins Inc. (CMI)
CMI designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components globally. The company operates in five segments: Engine; Distribution; Components; Power Systems; and Accelera.
On July 11, CMI was awarded $75 million to convert approximately 360,000 sq. ft. of existing manufacturing space at its Columbus Engine Plant for zero-emissions components and electric powertrain systems. The $75 million grant is the biggest federal grant ever awarded to CMI solely and is part of the appropriations related to the Inflation Reduction Act.
On May 20, CMI’s Accelera™ launched the next generation of cutting-edge decarbonizing technologies to shape the future of clean transportation. The new versions of its hydrogen fuel cell engines, a high efficiency eAxle, and its next-generation batteries are among the new products Accelera unveiled.
For the first quarter that ended March 31, 2024, CMI reported net sales of $8.40 billion and its income before income taxes grew 115.8% year-over-year to $2.22 billion. Net income attributable to CMI came in at $1.99 billion and $14.03, indicating growth of 152.3% and 151.4% from the prior year’s quarter, respectively.
In addition, the company’s adjusted EBITDA increased 89% from the year-ago value to $2.57 billion.
Analysts expect the company’s EPS for the fiscal year (ending December 2025) to increase 14.6% year-over-year to $21.21 and its revenue is expected to grow 4.2% year-over-year to $34.24 billion. Moreover, CMI has topped the consensus revenue estimates in three of the trailing four quarters.
CMI’s shares have gained marginally over the past month to close the last trading session at $283.17.
CMI’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Stability and Quality. Within the Industrial - Machinery industry, CMI is ranked #22 out of 77 stocks.
In addition to the POWR Ratings we’ve stated above, we also have CMI ratings for Value, Momentum, Growth, and Sentiment. Get all CMI ratings here.
Stock #1: 3M Company (MMM)
MMM offers diversified technology services internationally. The company operates through Safety and Industrial segment; Transportation and Electronics segment; and Consumer segment.
On May 14, MMM’s Board of Directors declared a dividend on its common stock of $0.70 per share for the second quarter of 2024. The dividend was paid on June 12, 2024, to shareholders of record at the close of business on May 24, 2024.
MMM pays an annual dividend of $4.47, which translates to a yield of 4.32% at the current share price. Its four-year average dividend yield is 4.48%. Moreover, the company’s dividend payouts have increased at a CAGR of 6% over the past ten years. MMM has raised its dividends for 65 consecutive years.
On May 3, MMM expands facility in Valley, Nebraska with a new 90,000-square-foot expansion which increases the plant's manufacturing capacity and add new jobs to the community.
For the second quarter that ended June 30, 2024, MMM posted net sales of $6.25 billion and its operating income was $1.27 billion. Net income and EPS attributable to 3M came in at $1.14 billion and $2.07, against net loss attributable to 3M of $6.84 billion and $12.35 per share in the prior year’s quarter.
Also, the company’s cash and cash equivalents were $10.08 billion as of June 30, 2024, compared to $5.73 billion as of December 31, 2023.
Street expects MMM’s revenue for the fiscal year (ending December 2025) to increase 3.5% year-over-year to $24.44 billion. The company’s EPS for the same year is expected to grow 8.9% year-over-year to $7.82. Also, the company surpassed the consensus revenue and EPS estimates in all of the trailing four quarters.
MMM’s stock has increased 51.7% over the past six months and 32.6% over the past year to close the last trading session at $121.76.
MMM’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
MMM has a B grade for and Growth, Sentiment, and Quality. It is ranked #10 out of 77 stocks in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have MMM ratings for Value, Momentum, and Stability. Get all MMM ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
ITW shares were trading at $247.11 per share on Friday afternoon, up $3.28 (+1.35%). Year-to-date, ITW has declined -4.60%, versus a 15.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
3 High-Quality Industrial Stocks to Buy and Hold StockNews.com
